8/18/09

Good morning. Mortgage prices are unchanged this morning after a pretty good day yesterday. July Producer Price Index was weaker than expected but that didn’t have much impact as inflation isn't a front burner these days so it isn't the rocker it normally can be. July housing starts were expected to be up, but were down 1.0%. The initial reaction to the 8:30 reports helped the bond and mortgage markets somewhat but didn't take much away from the better trading in stock index futures.

The rest of the session will focus on how the stock market does; after the 186 drop in the DJIA yesterday that sent interest rates down, this morning there is no follow-through. Equity markets are rock solid and refuse to buckle in the face of obvious consumer contraction. As long as that conviction remains, interest rates are not likely to fall much.

No direct economic releases now until Thursday when we see weekly jobless claims and the August Philly Fed business index. Thursday Treasury will announce the details for more supply next week; 2 yr, 5 yr and 7 yr notes will be auctioned. As long as the deficit is growing Treasury will be going to the markets every other week as it has for the past few months, a pressure point for the level of rates.

Oh yes…Sugar is at a 28 year high. I’m not sure what that means exactly, but thought you’d want to know.