Consumer Sentiment -July sentiment 63.8, down from 71.5 in June -Lowest since March 2009

Rates were down today as bonds rallied (FNMA 4% coupon +53 basis points) to regain most of yesterday’s sharp losses. The rally came as citizens clashed with police in Athens to protest a new round of income-reducing austerity measures, plus U.S. manufacturing and homebuilder data were resoundingly weak. This outweighed U.S. consumer inflation that some [...]

Consumer Inflation: CPI – Month/Month (overall) +0.2% CPI – Year/Year (overall) +3.6% CPI – Month/Month core (less food & energy) 0.3% CPI – Year/Year core (less food & energy) 1.5% Month/Month core is a tenth above “acceptable.” CPI details here.

The good news is that rates begin the May 16 trading week near 2011 lows. The bad news is that it’s because of a frail economy. Rates drop when bond prices rise, and mortgage bonds have rallied the last four weeks on lower home prices, weak GDP, and low core inflation.

Rates ended last week down .125% after mortgage bonds rallied huge Friday (FNMA 30yr 4% coupon +62 basis points) on tame March consumer inflation (CPI) data. Rates drop when bond prices rise on such a rally, and perception of low inflation encourages bond buying.

The nuclear meltdown situation in Japan is no less dire today as helicopters and water cannons are now being used to cool fuel rods and prevent spreading of radioactive material, but after utter market panic yesterday caused stocks and rates to drop, they’ve now reversed course almost entirely (Dow +166, S&P +21, and FNMA 30yr [...]

Consumer inflation was 0.4% for January and 0.2% if you strip out more volatile food and gas prices. On an annual basis, consumer inflation was also relatively flat at 1.6% total, and 1% excluding food and gas. All of these figures are tame, and this flat consumer inflation news has caused mortgage bonds to rally [...]

China’s NBS site delivering “Server Too Busy” errors right now. Reminiscent of early crisis days when S&P servers started crashing on Case Shiller Home price release days. Anyway, consumer prices came in at +4.9% versus expectations of +5.3% and last month’s year-over-reading of 4.6%. And producer prices came in at +6.6% versus expectations of 6.4% [...]

Rates closed Friday 2/11 net even on the week, a nice break (despite wild daily swings) after rising .375% the week before. Rates could resume their rise this week in response to inflation reports from the U.S., China, and Great Britain. Inflation worries may cause investors to continue selling bonds, and home loan rates rise [...]

Like most economic stats, inflation seems simple: it’s a measure of how consumer or business prices are rising in an economy. But how inflation is measured then interpreted by markets is less simple. Most inflation reports in the press—often referred to as ‘headline inflation’—are total consumer or business inflation numbers. But lots of effort goes [...]