Inflation news tops the economic data today as PPI, inflation at the producer level rose .1% while the core index rose .2%. The modest gains on overall PPI were much better than the expected plus .4% estimates. Core inflation however was .1% higher than economists were looking for. For now, inflation looks benign.
Housing Starts jumped 22% in February to 583K units. This is the highest level since November and well above market consensus.
Building Permits were also on the climb, up 3.0% in February. Hard to tell what’s going on here but we feel it is a combination of weather (bad in January – good in February), relatively small rise compared to very weak January numbers driving the large percentage gain, and a jump in multifamily projects as the rental market heats up. We’d like to see 2 or 3 months of this kind of trend to call a bottom in residential construction.
The Federal Open Market Committee started their two day meeting today. Expectations are for Fed Funds rate to remain unchanged, literally at zero and delivering a policy statement that will view the economy as weak with expectations for stability/recovery down the road due to the quantitative easing (money printing) that they are throwing at the economy. The verdict will be released at 1:15 pm cst tomorrow.
For now, call it the luck of the Irish as stocks are plus 60 something, mortgage backs are plus 2/32’s, and the 10 year note is near unchanged. Typical trading (neutral) during a two day FOMC meeting. Technical trading patterns reflect much of the same, hanging out in the middle of the range. We are currently in a triangle pattern with 2.84% yield as one extreme and 3.03% yield as the other. A break of either level will force the next directional move. Until then, grab a green beer and put on a little bag pipe music.
