15 May LOCKING BIAS
A low wholesale inflation report out this morning, combined with worsening conditions in Europe, are helping bonds this morning. The Producer Price Index (PPI), which measures price changes on a wholesale level, fell by .7% in April. The year-over-year PPI fell to .6% from 1.1%, providing the Fed more security to continue QE3. Further, the Euro-Drama is far from over, with several European countries showing weak and even negative growth. With QE3 continuing to boost the US stock market and business growth, there is a lot of push and pull happening on an investor level. This is why we are seeing day-to-day swings in the market. With mortgage bonds still unable to muster a rally above support levels, we will continue suggesting locking at current levels for loans set to close in the near future.