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Here’s what we’ve got for you today:

1. Why rates rose last week & what can change their course

By the way, this article on Nuwave’s Second Look Program is the most clicked link in this newsletter, you should check it out if you are interested.

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Nuwave Rates Today 📈

Why rates rose last week:

If I could sit behind this computer and write a short blog post explaining exactly why rates rose so sharply from Thursday afternoon until this morning…I’d be a very rich man.

Unfortunately, I am not a rich man.

The impact we have seen over the last three market days has been nothing short of unjustified.

There hasn’t been any radical data released indicating what the Fed will do, there are even Fed chairmen on CNBC this morning saying the Fed won’t raise rates in September, yet bonds continue to fall.

On Thursday, the Producer Price Index (PPI) was released - typically not a market mover for bonds compared to CPI.

The Core PPI reading remained unchanged from a month ago, only .1% higher than the forecast - and the bonds began selling like wildfire.

Here is a great synopsis from Mortgage Rate Watch - Rates are Officially Breaking the Rules, But Why?

A few highlights from this blog:

• CPI has been indecisive over the last two years, and the most recent report broke the trend

• 10yr Treasure Yields (what 30yr mortgages usually follow) have largely ignored the positive news over the last quarter. They continue to rise.

According to the article, three things need to happen before the course of this changes and we see relief in mortgage rates:

• Annual core inflation gets back near 2%

• The economy shows more serious signs of stress

• Something completely unprecedented results in the US taking in higher revenue and spending less money

This is all highly speculative to say the least. As I wrote in a previous edition, it appears August will continue to be a month of overreaction.

It seems we have all but lost any peg we can use to properly forecast mortgage rates…and we are just along for the ride.

The Cul-de-Sac

Thanks for reading - that is all we have for today 😎

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— Michael F DiLucchio