Rates Steady Despite 4% Business Inflation Since December 2009

Besides yesterday’s Treasury auction, we had little scheduled news yesterday and rates finished the day flat. Given that rates started off the day being worse than Tuesday’s close, some lenders issued rate improvements, especially after the Fed’s Beige Book showed continued economic weakness – especially in housing. One trader wrote, “We are going to look to get ‘long’ mortgages outright as we approach the 30yr bond auction tomorrow.” This helped rates.

The Fed’s latest Beige Book report on the recent state of the economy across the 12 districts showed signs of further expansion in the economy and even labor markets since the last report (which led stocks higher), but the real estate sector remained weak across all the Districts with a few reporting further weakness. For today’s excitement, we’ve already had Jobless Claims, which were up 35k to 445k, continuing claims dropped, and the 4-week moving average was +5,500. December’s PPI came in at +1.1%, about as expected, and ex-food & energy it was +.2%. This business inflation number was up 4% since December 2009, a strong reading, but so far rate markets aren’t reacting to it—click for more inflation data. Lastly the Trade Balance figures came in at $38.3 billon. Later we have the $13 billion 30-yr auction. So far rates are steady as mortgage bond markets await the results of this morning’s 30yr Treasury bond auction.