Interest Rate Roundup

Wednesday, October 18, 2006

da bonds

You know, I hate to keep harping on the same thing ... but look at the bonds.

Yesterday's "great" decline in headline PPI caused bond prices to spike up ... but they gave back almost all of those gains by the end of the day.

Today's big decline in headline CPI ... and on-consensus increase in core CPI ... caused bond prices to spike higher. Now, they're trading back to flat. One possible catalyst: While headline inflation fell due to energy, the “core” CPI jumped another 0.24%. That pushed the year-over-year change in core consumer inflation UP to 2.9% from 2.8% a month earlier. In fact, core prices haven’t risen this much in ANY month going all the way back to January 1996.

The "weak" jobs report several days ago? That got sold aggressively, too.

I believe we simply have to keep watching the interest rates here. The big rally in bond prices (and decline in rates) helped stabilize housing a bit in recent weeks. Will rising rates on renewed inflation fears change that dynamic? And what about inflation? What if it's not dead and buried, the way Wall Street's been proclaiming?


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