Fighting Off Inflation

Despite very negative inflation indications from the Producer Price Index report today, Mortgage rates are holding their ground after a bad day yesterday.

Rates rose drastically yesterday as continued updates on the proposed bond-insurer bailout were released.  The market rallied on the news which hurt mortgage rates.

Today, many indicators show a weak economy, including a very weak Consumer Confidence Report.  This weakness, combined with what might have been a slight overreaction yesterday is helping mortgage bonds hold their levels from yesterday afternoon.

Locking is safe, but floating could pay off.  It's reassuring to see bonds fighting off inflation which was not expected.  This means that the markets are indeed giving weight to economic data.  This is important because I believe we will have more negative economic data in the coming weeks.  And remember, negative news for the economy is generally good news for rates.

There is no more inflation news for the rest of this week.  Continued economic weakness could lower rates a bit, but so far today, the markets have not responded drastically to consumer confidence numbers.  It appears the inflation reading is preventing mortgage rates from going much lower at the moment.  If the bond-insurer bailout is underwhelming and more weak economic data surfaces, we might move lower.