Market Analysis

The bond market worsened today on higher than expected inflation at the Producer level.  Tomorrow, with the release of the Consumer Price Index we will see if those pressures have passed through to consumers through price increases.  It is important to note that the March Producer Price Index showed year-over-year inflation including food and energy running at 6.9%, its highest mark since the early 80's.  Core producer prices, which exclude food and energy components are up on a year-over-year basis 2.7%, their highest annualized mark in more than a decade.  Inflation causes the effective yield on bonds to be lower (if inflation runs at over 4% and the 10 year Treasury delivers 3.5% then the investor loses money in after-inflation dollars).  Thus yields/rates are pushed upward to deliver a better return.   It is important at times like these to watch the market carefully.  It is not certain that rates are going to move up.  However, it is very easy to get stuck on the sidelines waiting for a return to your "target" rate while the market moves notably higher.  If you think you may want to use Iron Harbor, we recommend having your loan set up and ready to go with us so that if the market continues to deteriorate we can get your loan locked asap.  The first step with Iron Harbor is to be pre-approved.  You can access a short application form at http://www.ironharbormortgage.com/xSites/Mortgage/IronHarbor/Content/UploadedFiles/Iron%20Harbor%20Short%20Application.pdf

Posted by Matthew Breston on April 15th, 2008 12:49 PMPost a Comment (0)
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