Happy Friday, Brian Manning here with the weekly update, Let’s get right to it. Monday was a relatively quiet news day this week, Tuesday we got CPI. So, CPI is the Consumer Price Index and we really feel like that’s our favorite gauge of inflation here in the US because the CPI takes into account everything we spend in regards to out-of-pocket medical expenses and cost of living. I don’t know many people who are not paying for out-of-pocket medical expenses or cost of living. The alternative to that is the PCE, that’s the Personal Consumption Expenditure. That’s the Federal Reserve’s favorite gauge of inflation but this week we got the CPI.
So CPI showed that on a month-over-month basis really, the core inflation was relatively flat at 1.4%, so relatively non-existent. And then we have a report on rents and that’s kind of a component of the CPI as well and rents are increasing at 2.1% per year, so down a little bit, they were up at that 2.3%, so I wouldn’t call it cooling in the rental market but down from where it was before.
On Thursday of this week, and this is kind of a recap of bond 10-year treasury auction and not to get too geeky on all the economics stuff, but the 10-year treasury certainly leads the way and is a very good indicator of what mortgage rates are doing and this week was kind of, a very pivotal auction to something we really wanted to pay attention to because if the auction didn’t go very well then likely, we’ll see the yield in the 10-year treasury really increase but we actually have a lot of foreign participation in the 10-year auction and that’s not uncommon. If the dollar starts to weaken we start to see foreign countries purchase these 10-year treasuries because they want to strengthen our dollar, because when foreign countries introduce money into the 10-year treasury it strengthens the dollar and it makes their exports more appealing. So, we did see a lot of good foreign activity in the 10-year treasury auction this week and it was a little bit helpful for us on yields and also mortgage rates, which we’ll talk about again in a moment.
Also, we had Jerome Powell this week talking about unemployment and he says that, you know, he really feels the true unemployment rate in America right now is about 10%. If you look back at last week’s update video on Friday, we talked about that. We talked about why we thought the media was wrong at 6.3%-6.4% unemployment and why we really thought it was in that 10% range and here we go, this week, is Jerome Powell just kind of reassuring us, unfortunately, unemployment is floating really around 10%.
I just want to look at the charts really quick as well to show you some feedback. So this is the yield on the 10-year treasury and although mortgage rates don’t go in lockstep with what the yield is doing, they usually, kind of move in the general path of the way the 10-year treasury is going as well. So from January 27th through today, we kind of have seen an increase in the yield, and today we’re right here at this top and this is a very important point for us right now, as far as mortgage rates are concerned in the 10-year treasury yield. So, If a yield breaks above this and the yield continues to go up then we will likely start to see mortgage rates slightly increase as well. But if this, kind of, puts a cap on it right here and the yields start to come down, then we’ll see mortgage rates get a little bit better. So, when I say “a little bit better”, we’re moving in very small, incremental movements right now. You know, 1/8% and 1/4% so you’re not seeing anything drastic. I’m not trying to freak everyone out but you’re not going to see major movement in interest rates. But this is really important because this is going to go one of two ways. You know, we saw here a good example of the 10-year treasuries stop right in this line and then it kind of got better. So, you had a little bit of improvement in the mortgage rates. So, now we’re kind of testing it again. So, we’re going to have to wait and see what happens, keep an eye on this throughout the day today.
I’ll probably try to do another update on this on Monday or Tuesday, we’ll look at what the treasury yield is doing as well and we’ll see how it goes. I’m around all weekend, we have the most wonderful, wintery weekend. I’m so excited. I’ll be available all weekend long. If you have any questions, call me, text me, reach out to me at any time, I’d love to help you in any way I can. Happy Friday, I hope you have a great day.