Producer Level Inflation Muted in Feb. Gasoline Index a Drag on Prices

Good Morning. Happy St. Patrick's Day.

The BLS released the Producer Price Index at 830am. Producer prices fell 0.6% in February following a 1.4% rise in January. The core read, which strips out volatile food and energy costs, rose 0.1% following a 0.3% uptick in January. Both prints were below consensus estimates, in effect confirming the Fed's lack of concern about inflationary pressures. Intermediate goods did see a slight increase in price levels though, led by rising prices paid for manufacturing materials. At the earliest stages of production, prices plummetted.

Across all stages of production, falling energy prices in February accounted for the majority of deflation with gasoline being the biggest drag.  The Fed doesn't put much emphasis on commodity induced inflationary pressures....not yet at least.

Stocks and bonds are both rocking green to celebrate.

The S&P is +4.19% at 1163. Yes I know---Catholic Irish folks would not like me for using orange on St.Patrick's Day---it matches though. :-D

 The US10YR TSY note is +0-03 at 99-27 yielding 3.644%. 10s moved lower overnight before bouncing off the 62% retracement target at 3.634%. This technical study has proven to be quite the guidance giver...

Mortgages are not so green, they are trading in all Irishmen's most loathed color: BRITISH RED.  The FN 4.5 is -0-01 at 101-01 yielding 4.38%. The secondary  market current coupon is 4.335%.  "Rate sheet influential" MBS yield spreads are wider. This is a normal occurrence when benchmarks rally, but something we are keeping a close eye on.

REPRICES FOR THE BETTER AT 101-10. REPRICES FOR THE WORSE AT 100-26

Rate sheet rebate is slightly improved. Do not put Jameson in your Guinness please...it's insulting to the Irish.