Tomorrow July CPI expected 0.0% with the core expected +0.2%. Last Friday July PPI was actually down 0.4%. July housing starts and permits; starts expected -0.75% at 1180K, permits +0.6% at 1160K units. July industrial production expected +0.3% after increasing 0.6% in June; July capacity utilization 75.5% frm June’s 75.4%. Factory use has slowed since Dec 2014 when it reached 79%. Not that it matte4r5s one bit,, but Dennis Lockhart, Atlanta Fed is scheduled to talk at 12:30 tomorrow with Q&A; other reporting Fed speeches I don’t pay much attention to them anymore. That said, markets suck up every syllable as if gospel, the media salivates over them.
The stock market continues to increase as the global economic outlook is expected to slow. Not sure when that will end but when it does the run to safety will match the rush out the door. It may end when companies run out of funds to buy back stocks and increase dividends. Oil looked vulnerable a week ago, since then the price has increased, the equity market just loves that but I suspect it is lemmings following the leaders. The VIX index of volatility is so low that should bother investors, but it hasn’t. Low volatility is evidence of complacency that usually happens before a market turn. Not willing to use the term bubble but it is getting close; defining the term though is as hard as defining ‘moderate’, ‘near term’, or ‘medium term’ that the Fed uses to cover specifics.
The 10 in the middle of its range at 1.55% +4 bps, MBS prices lower on the day and lower than when prices were set this morning. Our technical models remain neutral and until the trading rage breaks loose on the 10 yr (1.50%/1.60%) there will be no change to that and holding rate locks doesn’t benefit LOs and only slightly lenders if they can capture the swings correctly.