Mortgage Rate Indicators for Denver

Mortgage bond prices fell last week applying slight upward pressure on home loan rates. The market remained very volatile within a narrow range. With the lack of data the first portion of the week, oil prices factored into trading. Oil remained above $80 a barrel, which reignited inflation concerns. The retail sales report released Friday was much stronger than expected, indicating the US economy may be getting stronger.

Rates rose about 1/8 of a discount point for the week.

The Fed meeting Tuesday afternoon will be the most important event this week. The inflation data from both the consumer and producer sides will also take center stage. Signs of inflation are generally not received well by the mortgage bond market. If inflation remains in check, mortgage bonds could benefit.

Producer Price Index

The producer price index is a measure of prices at the producer level and is important because it is the first inflation report to be released each month. Investors are typically able to gain an initial indication of inflationary pressures from the release. If producer prices are increasing, there is a tendency for producers to pass the increases on to consumers in the form of higher priced goods. It is important to note that the PPI is only a measure of goods, while the consumer price index is a measure of goods and services. It is possible for the price of goods to remain stable, while the price of services increases. In this scenario PPI would do little to warn of a change in inflationary pressures, while the CPI report would provide an indication of the inflationary effects of the service component. This distinction between the two reports shows why most analysts view the CPI as a more accurate indicator of inflation. Nevertheless, market participants still gain valuable insight into potential volatility in the financial markets from the PPI release.

Be cautious heading into the inflation data and Fed meeting this week.

©2010 Design by WR Starkey Mortgage, LLP NMLSR #2146. This is not a guarantee of financing. All borrowers must meet certain underwriting guidelines and credit criteria. Rules and Regulations may apply.