Good Friday AM,
Bonds opened under pressure but have since clawed back to almost unchanged. It is a good sign! The news this morning was very unfriendly to bonds as the PPI index came in hot, too hot (4.3% annual increase)! Traders now fear that if the wholesale rate of inflation was too hot, perhaps the Consumer price index will also be too strong. The FED already knows that there will be an uptick in inflation as buying is getting caught up from the pandemic, supply lines are taxed and as a result, prices will rise temporarily. After the gains in bond prices (lower rates) this week, a pullback in this case may be constructive and help set us up for new highs. This is what price does, it moves up and down in waves and is not linear. We need this pull back to end above the bottom of the last low that was made on March 30th. For the moment, the glass half full view is the early morning pullback and current improvement is necessary and positive. CPI will offer additional guidance when it is released next Tuesday. Hopefully, it does not spark a lot of selling. It feels like most of the big selling is over and we could be in a leg down in rates. Please, please keep in mind, it is never a straight line.
A few interesting comments, non-mortgage.
- The attempt to unionize Amazon workers in Alabama failed as more workers voted against unionizing than voted for it.
- The Egyptian government is holding the Ever Given cargo ship, which blocked the Suez Canal, until the ship owner pays a $1billion fee for the cost of freeing the vessel and for the missed revenue during the week it was stuck (yes that is $1 billion)
Please remain safe and healthy, enjoy the weekend and first, make today great.