Good Tuesday AM,

Less inflation… PPI (Producer Price Index) was released today, which is similar to CPI but at the Producer level instead of the consumer level. Month over month it came in at 0.2 vs 0.5 expected. The Core was flat at 0.0 vs 0.4 expected. The one stronger metric was the Empire State Manufacturing which bounces all over. It came in at 4.5 vs -5. Equities jumped and have kept their gains. Treasuries also gained and the 10-yr is sitting at 3.82%. Mortgage bonds were up but have since given up those gains. Mortgage bonds are the red headed stepchild for now. That will come back in a few days.

The ebbs and flows of markets.

Mortgage bonds had outsized gains last week and are seeing the other side of that today. I still see rates improving substantially, but it is not an overnight move and not a straight line. Tomorrow, we get retail sales data and a few others. Thursday is unemployment claims. It is hard to have an expectation any of the data coming out will be strong but that doesn’t mean we shouldn’t still be defensive.

I continue to mention that given a choice of trustin; data or supply/demand for trading and pricing moves, I would choose the latter. Supply/Demand will always be more relevant for prices (which includes rates). Supply/ Demand is the reason why there is currently a disconnect on the spread between the 10-yr Treasury and the 30-yr mortgage rate. Typically, that spread is 1.75%. Today it has widened to almost 3.00%. Banks have stepped back from buying mortgage bonds. So has the Federal Reserve, the largest investor in that market. Foreign buyers and money managers are curtailing purchases too. This lack of buyers has pushed mortgage rates to their highest level in 20 years. It is important to recognize that all things are in constant state of flux and at any one moment there are outliers but, those outliers smooth out over time. This is another reason why I firmly believe rates will improve drastically. The current spread alone shows we should have rates more than one point lower than where they are now.

The population of the planet is set to hit 8 billion TODAY!

Fed Vice Chairwoman Lael Brainard on Monday said the central bank’s blistering pace of rate rises was on track to slow down.

This was pretty interesting…

Tough to imagine prices dropping substantially, especially in communities where there is a large percentage of free and clear homes.

30 Million! The square feet of office space placed by companies in the technology sector on the sublease market, according to real estate services firm CBRE Group Inc.

Please remain safe and stay healthy, make today great!