28 Sep Inflation this Week
Happy Monday everyone! We will be getting some inflation news later this week. As we have said, due to constricted supply chains through the rebound of the US consumer market, we believe we will see a run-up in inflation. In the mid to long term, this will have upward pressure on mortgage rates. However, there is the deflationary factor of the over $4T the US had added to its balance sheet. The reason that this is deflationary is because the government at some point will need to pull back spending as well as increase taxes to pay this debt. Now, we do not think this weeks report will reflect this but it is important to watch for in the long term.
Mortgage backed securities are about flat from where they were on Friday. Like we talked about last week, we still have a double floor of support below us for protection. However, negative news regarding inflation could threaten our position. We hold a locking bias unless you are able to closely watch the market.