The Case-Shiller report was released this morning, which measures the average of 20 US cities home value change, came in at a roaring increase of 1.3% in the month of August and a year-over-year increase of 12.8%. The last time this report was this strong was way back in February of 2006! Although this is an encouraging sign, although not expected to turn negative, it is not expected to continue to grow at this rate. Additionally, PPI (which measures inflation on a wholesale level) was reported down .1%. With virtually no inflation in the wholesale market, it is not likely we will see inflation on the retail side. This is positive news for the bond market, as this is likely the key measurement the Fed is watching to determine when to taper QE.
The Fed begins their 2 day meeting today, with the results released tomorrow. We anticipate the bond market to fade between now and then. With the technical pointing to a small pull-back, we are suggesting locking short term transactions. If you have time, and can stomach some volatility, we feel rates will drift lower over time.