Inflation and consumer level was reported lower than expected today and the Consumer Price Indes (CPI) came in at 0.1% versus the 0.3% estimated. This left year-over-year headline CPI at -1.3% and the lowest level since 1950, showing that inflation has not been an issue - but many, including myself, feel that inflation will become a tough customer to deal with in the future.
Mortgage Bonds liked the very tame inflation read and continued their run higher. They have been in rally mode of late, gaining 360bp in just the past five trading days...all signaled by the Positive Stochastic Crossover and Bullish Engulfing Pattern. Mortgage Bonds are testing a tough ceiling at their 25 day moving average, and has been the case of late, Mortgage Bonds will follow in the opposite direction of stocks, which are falling through their 200 moving average and appearing to head lower yet.
There is still quite a bit of ground to be made up by bonds from their fall from highs on May 20th. Stay tuned, let us hope rates stay low to get this economy moving.
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