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.