Mortgage Rates Fall Back
Mortgage Rates Fall 9-13-2005
Mortgage rates retreated to previous levels on Tuesday after staging a one-day surge on Monday.
A report reassuring traders of U.S. Treasury securities that inflation is indeed under control allowed buyers to tiptoe back into the bond markets. Fear of increasing inflation, which robs fixed-rate assets of their value, kept pressure on Treasuries yesterday, as did falling oil prices. But today's reverse in sentiment sent bond prices back up and their yields, which move in the opposite direction of prices, down to Friday's levels. This allowed mortgage lenders who base their rates on Treasury yields to edge rates back down.
The Producer Price Index (PPI), which measures inflation at the wholesale level, rose by a less-than-expected 0.6 percent in August. Analysts were forecasting a 0.7-percent increase in PPI and a 0.1-percent rise in the core rate, which excludes volatile food and energy prices. The core - the number that most economists regard as a better indication of widespread inflationary pressures - was unchanged in August after rising 0.4 percent in July.
In a separate report, Industrial Production for August is expected to climb 0.4 percent - a big increase over the 0.1 percent rise in July. Capacity Utilization, the percent of mines, utilities and factories in production, is expected to edge up to 79.9 percent from the previous 79.7 percent in July. Bigger increases in production could be interpreted as adding to economic strength, which could provoke selling in bonds. Because Treasury yields, which lenders base their rates on, edged back down to previous levels, this should allow mortgage lenders to hold rates at newly lowered levels.
Mortgage rates retreated to previous levels on Tuesday after staging a one-day surge on Monday.
A report reassuring traders of U.S. Treasury securities that inflation is indeed under control allowed buyers to tiptoe back into the bond markets. Fear of increasing inflation, which robs fixed-rate assets of their value, kept pressure on Treasuries yesterday, as did falling oil prices. But today's reverse in sentiment sent bond prices back up and their yields, which move in the opposite direction of prices, down to Friday's levels. This allowed mortgage lenders who base their rates on Treasury yields to edge rates back down.
The Producer Price Index (PPI), which measures inflation at the wholesale level, rose by a less-than-expected 0.6 percent in August. Analysts were forecasting a 0.7-percent increase in PPI and a 0.1-percent rise in the core rate, which excludes volatile food and energy prices. The core - the number that most economists regard as a better indication of widespread inflationary pressures - was unchanged in August after rising 0.4 percent in July.
In a separate report, Industrial Production for August is expected to climb 0.4 percent - a big increase over the 0.1 percent rise in July. Capacity Utilization, the percent of mines, utilities and factories in production, is expected to edge up to 79.9 percent from the previous 79.7 percent in July. Bigger increases in production could be interpreted as adding to economic strength, which could provoke selling in bonds. Because Treasury yields, which lenders base their rates on, edged back down to previous levels, this should allow mortgage lenders to hold rates at newly lowered levels.
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