Lower Inflation = Lower Rates

Good morning and happy Friday everyone!

We got CPI numbers in yesterday showing a continued slow in inflation. The reading showed .2% increase in November. This is good news for mortgage rates as inflation pushes rates up.

Mortgage backed securities are up this morning after the Fed bought up a massive amount of mortgage bonds. While they have averaged around $100B per month in mortgage backed security purchases, they bought up  $41B last week. This increased appetite will push mortgage rates down if it continues. Mortgage backed securities have rode their 25 dma for the past 6 days giving us confidence that this is a floor of support that we can trust to hold. If you are able to closely watch the market, there is an opportunity to see gains in pricing over the weekend. However, there is expected vaccine rollout news at the beginning of next week which could cause turbulence for the MBS market.