Monday Market Commentary

by Alex Stenback on December 17, 2007

1217_mortrate
                                                                 Graphic via MSNBC
Last Week:
Despite the Fed cutting key rates, mortgage rates lost some ground last week. the Consumer and Producer Price Indices both posted larger than expected increases.  Because inflation eats into the returns of the mortgage bonds from which mortgage rates are derived, any sign of it, especially of it is unexpected, tends to force rates upward.
This Week:
Speaking of inflation, on Friday the Personal Consumption Expenditures Index, or PCE prints.  This is a key inflation benchmark, so a spike here, following last week’s upside surprises in CPI and PPI, could send mortgage rates up.  Meantime, the market will need to digest housing starts, GDP for Q3, and the Philadelphia Fed index. All are measures of economic strength and activity – a bad housing start number is likely priced in, but any unexpected weakness in GDP or the Philly Fed could push rates down.
This Week’s Economic Calendar [Barrrons]

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