Houston's Rate Sheet

Consumer prices soar in January

The Government released their Consumer Price Index (CPI) yesterday and January was a tough month to be a consumer. Most of the increase came from food and energy costs. CPI rose .7 percent while Core CPI (CPI excluding food and energy) was up only .2 percent. Core CPI was right on track while total CPI was up much more than expected.

Surprisingly, bond investors were unshaken by reports of higher than expected inflation. Apparently, they don't think much of rising food and energy costs. The yield on the 10-year Treasury was down 3 basis points from Tuesday's closing yield, to 4.54 percent, and the five-year yield was down 1 basis point, to 4.58 percent. That's good news in the short term, because we might see a drop in mortgage rates this week. However, I can't imagine this will turn into a trend. The Fed will more than likely continue to raise interest rates, and I believe mortgage rates will follow.

posted by Vincent Biondillo @ 9:30 AM