Mortgage Rates Climb
Mortgage Rates Rise 9-12-2005
A trio of reports weighed on U.S. Treasury securities on Monday, sending prices down and yields, which move in the opposite direction of prices, back up to two-week highs. Meanwhile, oil prices continue to fall and that put big pressure on Treasuries, as traders believed that high fuel costs would slow the economy. And it now appears that, although horrendous, the damage caused by Hurricane Katrina will not be as extensive as originally feared. This could be interpreted as a lesser blow to the economy than expected -- a negative for bonds. And then there’s the Fed meeting. It isn’t scheduled until Sept. 20, but there has been a lot of hand-wringing over whether or not the Fed will raise short-term interest rates and what it will say after the announcement.
In addition to the above, there are some key inflation data due out this week that are of concern to traders, as well as the Advance Retail Sales for August. Tuesday’s Producer Price Index (PPI) for August, which measures inflation at the wholesale level, will be of major concenr. Signs of higher-than-forecast inflation would likely spur selling in Treasuries, as this erodes the value of fixed-rate assets, such as bonds. Analysts are expecting the PPI to rise 0.7 percent, but core inflation, which excludes volatile food and energy costs, to edge up by a tame 0.1 percent.
These pressures forced Treasury yields, which mortgage lenders use to set rates, up and mortgage rates followed. Rates rose by one-eighth of a point (0.125) on most popular products.
Coming Up:
The Producer Price Index for August is set for release on Tuesday along with the July U.S. trade deficit. The trade gap is expected to tick up by only $1 billion to $59.8 billion from $58.8-billion shortfall in June. This report generally influences the currency markets more than stocks or bonds. In addition, two weekly surveys of retail activity for the previous week will be released, but their impact is muted.
Treasuries will likely dance to the tune of the PPI on Tuesday. If it comes in on target, i.e., shows that inflation at the wholesale level is benign, Treasuries may get a boost, but inflationary numbers would likely cause selling that could put upward pressure on mortgage rates.
A trio of reports weighed on U.S. Treasury securities on Monday, sending prices down and yields, which move in the opposite direction of prices, back up to two-week highs. Meanwhile, oil prices continue to fall and that put big pressure on Treasuries, as traders believed that high fuel costs would slow the economy. And it now appears that, although horrendous, the damage caused by Hurricane Katrina will not be as extensive as originally feared. This could be interpreted as a lesser blow to the economy than expected -- a negative for bonds. And then there’s the Fed meeting. It isn’t scheduled until Sept. 20, but there has been a lot of hand-wringing over whether or not the Fed will raise short-term interest rates and what it will say after the announcement.
In addition to the above, there are some key inflation data due out this week that are of concern to traders, as well as the Advance Retail Sales for August. Tuesday’s Producer Price Index (PPI) for August, which measures inflation at the wholesale level, will be of major concenr. Signs of higher-than-forecast inflation would likely spur selling in Treasuries, as this erodes the value of fixed-rate assets, such as bonds. Analysts are expecting the PPI to rise 0.7 percent, but core inflation, which excludes volatile food and energy costs, to edge up by a tame 0.1 percent.
These pressures forced Treasury yields, which mortgage lenders use to set rates, up and mortgage rates followed. Rates rose by one-eighth of a point (0.125) on most popular products.
Coming Up:
The Producer Price Index for August is set for release on Tuesday along with the July U.S. trade deficit. The trade gap is expected to tick up by only $1 billion to $59.8 billion from $58.8-billion shortfall in June. This report generally influences the currency markets more than stocks or bonds. In addition, two weekly surveys of retail activity for the previous week will be released, but their impact is muted.
Treasuries will likely dance to the tune of the PPI on Tuesday. If it comes in on target, i.e., shows that inflation at the wholesale level is benign, Treasuries may get a boost, but inflationary numbers would likely cause selling that could put upward pressure on mortgage rates.
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