Weekly jobless claims were down by 3,000 to 450,000 for the week. We would have expected the stock market to react positively and the bond market to sell off but it really didn’t happen. I suppose investors are waiting for some actual good news.
The Producer Price Index was up marginally from last month but in line with expectations. This is one of the key measures to track inflation and as it stands today, inflation shouldn’t be a fear for some time to come. Inflation is one of the primary drivers of increasing mortgage rates. As inflation increases, it erodes the value of fixed rate securities like the 10 year treasury or mortgage backed securities. In order to keep up with inflation, the rates on mortgages will increase.