LAST WEEK
Last week mortgage bonds ended the week were they began leaving mortgage rates nearly unchanged. The ride for bonds was not smooth. They reacted negatively early in the week due to inflation fears when crude oil shipments was halted coming out of Georgia due to the Russian bombardment of the country. Some bad economic news helped when Macy's and John Deer reported poor earnings, remember bad news usually helps bonds and mortgage rates improve. The CPI report was reported much hotter than expected showing consumer prices increase 5.6% over the last year. The bond market did not react as negatively as expected since the CPI reported was when oil prices were $147 per barrel and have now come down off their highs. This drop in oil process made traders think next months CPI report will be much tamer. Tame inflation reading came out of the Empire State Index Report on Friday helping bonds end the week at nearly unchanged levels. Other than economic reports mortgage bonds are fighting tough overhead resistance provided by the 25-day and 50-day moving average. These averages can cap advances when they are above the current bond pricing just as they can lend support if they are underfoot. I will be watching these moving averages and bond this week to see if they can break through and close above these averages.
THIS WEEK
This week there are not many high impact reports to move the markets. We will get a read on the health of the housing sector with reports out on building permits and housing starts. We will also a look at inflation at the producer level with the Producer Price Index (PPI). Last months PPI report came in much higher than expectations. It will be interesting to see if the inflationary pressures at the producer level subside. The Philadelphia Fed Index is the only high impact report for the week. The Philly Fed Index gives a read on manufacturing activity in the tri-state area on Pennsylvania. This is one of the most carefully watch manufacturing reports. If it shows manufacturing activity is stronger than expected stocks could move higher at the expense of bonds and mortgage rates could worsen.
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