Happy Friday, Brian Manning here with the weekly update leading into this Colorado Spring snow-again weekend. I’m pumped, I love snowy weekends, I can’t wait. Let’s talk about the news. So, Monday of this week was a quiet news day, not much to talk about there. Tuesday was relatively quiet as well. Wednesday of this week we got CPI. So CPI is the Consumer Price Index, this is what we think of as probably one of the best gauges of inflation and on a month-over-month basis as for the month of February the core rate was up 1/10%. So the core rate strips out the volatile costs of food and energy because if you look at oil prices, for example, they’re up and down and up and down all the time. Food prices go up and down as well, so the core rate strips out the volatility of food and energy and we’re up 1/10% for the month of February and we’re at 1.3% inflation rate year-over-year.
So the Federal Reserve is always watching these and Jerome Powell has been very vocal, saying, “Hey, our target is 2% inflation although we might let it run a little bit high”. Something for us to pay close attention to, going into the future is when we start looking at inflation in the months of April and May. So April and May inflationary numbers will start to remove April and May numbers from last year and April-May of 2020 was when the pandemic was really in full-force lockdown and there were some months where inflation was at a negative number, so inflation is coming, it might only be temporary but we have to watch this because it will have an impact on interest rates. We’ll talk about this more as we get closer but certainly, it’s something for us to keep an eye on.
Thursday of this week, we had Christine Lagarde, she’s the head of the ECB, that’s the European Central Bank. She’s kind of like the Jerome Powell in Europe and Christine Lagarde announced that they’re just going to continue on and beef up their bond-buying spree so what that means is that they’re going to continue buying bond and when European Central Bank continues to buy bonds, it’s a way for them to force keeping interest rates low. For us, we have the Federal Reserve meeting and putting out a press release and talking next week. All eyes on the Federal Reserve next week because if Jerome Powell comes out of this and says, “Hey, we’re going to follow suit of the European Union and we’re going to implement, what’s called Yield Curve Control” so that’s when they beef up their bond-buying as well, it could have a positive impact on interest rates or if they don’t say anything about it, it could have a negative impact on interest rates. So next week is going to be a really important week as well. We also got our stimulus package $1.9 trillion the area we’re going to look at closest right now is going to be for unemployment. So, this stimulus package extends to $300 additional unemployment through September 6th and also, extend what’s called PUA Pandemic Unemployment Assistance. (PUA) gives unemployment for people that normally wouldn’t qualify for that and it provides that through September 6th now, as well. This is something for us to watch because as people get vaccinated and the economy starts to open up, there’s a potential that people that are on unemployment or on PUA or they’re earning more on unemployment or they’re earning more on PUA to where they’re not really incentivized to go back to work and now that these are really in place until September 6th they could have some impact on the labor market as well. We’ll have to wait and see what happens there.
Today we got what’s called the PPI. PPI is what’s called the Producer Price Index. So this measures inflation on a wholesale level and this report is never really looked at all that much but knowing that we’re in the beginning to middle of this year, we’re coming into what’s going to look like hot inflation numbers, so PPI is something that was definitely closely looked at today and on a month-over-month basis the PPI was up 0.5%, which is a really large number. So certainly, inflation is starting to kind of rear its head. One thing I want to look at here on the charts today is just the yield on the 10-year treasury. We’ve looked at this a few times now and mortgage rates typically kind of go on the trajectory of the same path of the 10-year treasury. So we’ve been talking about this from back in like January 5th and we have slowly seen mortgage rates rise.
What’s interesting is that if we look at this the yield on the 10-year treasury. This was back on February 25th. We got to this number up here, at 1.6%, came back down. We hit it again at 1.6% it came back down. Hit it again at 1.6% it came back down but today, based on the inflationary numbers that we’re seeing for the first time, the yield on the 10-year treasury is solid above 1.6%, it’s at 1.62%. So we have to really keep a close eye on this. If the yield continues to go higher, it has an impact on mortgage rates but maybe next week with the Federal Reserve speaking if they any information on a potential beefing up of their bond-buying program they might kind of keep a lid on this. So for right now, we’ll have to wait and watch and see what happens but certainly next week is going to be very pivotal as far as the yield on the 10-year treasury and a direct impact for us with mortgage rates as well.
I’m around all weekend, if you have any questions, let me know. I would love to help you in any way we can. Snowy weekend, I’m going to be hanging out in my couch, watching movies. Call me on my cell phone, text me. Happy Friday, I’ll talk to you soon.