John's Finance Corner: Market Insights - Treasury Bonds and Mortgage Rates
Last week was quite eventful for Treasury Bonds and Mortgage Rates as we received two significant inflation reports and crucial retail sales numbers. Here’s a breakdown of what happened and what it means for you.
Consumer Price Index (CPI) Report: The CPI came in higher than expected, with a 0.5% month-over-month increase and a 3% year-over-year rise. The Core CPI, excluding food and energy, saw a 0.4% month-over-month and a 3.3% year-over-year increase. The primary contributors to this rise were food (especially eggs), energy, shelter, used vehicles, and motor vehicle insurance. Notably, shelter costs, which account for about 35% of the headline CPI and 44% of the Core CPI, have a reporting lag of 12-13 months, impacting the accuracy of current inflation data. However, as we move further into 2025, shelter cost data should catch up to real-time, potentially improving inflation figures.
Producer Price Index (PPI) Report: The PPI, which measures wholesale price changes, rose by 0.4% in January, exceeding expectations. The annual rate remained steady at 3.5%. The Core PPI increased by 0.3% month-over-month, while the year-over-year rate slightly declined from 3.7% to 3.6%. PPI data is essential as components of it factor into the Fed’s preferred inflation measure, the PCE, due at the end of the month. Declines in costs for healthcare and airlines could positively impact PCE figures, a welcome sight for February 28th.
Retail Sales Report: A decrease in retail sales helped bonds and rates towards the week's end. While retail sales data was high to close 2024, January saw a significant 0.9% drop, far below forecasts. This was the largest monthly decrease in two years. With credit card debt reaching $1.2 trillion, an all-time high, the January retail sales decline likely resulted from consumers managing post-holiday expenses.
Looking Ahead: This week, we will see reports on homebuilder confidence, new construction data, and existing home sales. We’ll also get our weekly jobless claims data and the minutes from the Fed’s most recent meeting, which could impact markets. Last week, Fed Chairman Powell noted that while inflation has significantly eased over the past two years, it remains above their 2% goal. He mentioned that the Fed is not in a hurry to cut the Fed Fund Rate further until stronger data supports such a move.
As we move forward, keep an eye out for further updates! Should you have any questions or require personalized guidance, please reach out to our team. We’re dedicated to providing expert insights and assisting you in making well-informed decisions within the mortgage market.
John Lamberg
MORTGAGE LOAN ORIGINATOR
NMLS 189233
