Inversion Indicator, Cass Freight, Inflation

The 10 Year Treasury Bond and the 2 Year Treasury bond inverted (2 year yielded a better return than the 10 year) for a brief period of time and now many folks are buzzing about this inversion because it is a very reliable indicator of recession. Campbell Harvey is the economist who first looked into this inverse relationship and he thinks that a short blip is not a major indicator, that a prolonged inversion of the 3 month treasury (which is a better sentiment of what is happening at the now) is a more accurate indicator.

Mortgage Rates moved sideways this week as the price of Mortgage Backed Securities (MBS) ended the week slightly higher than when they started. MBS continue to ride a downward escalator. Mortgage rates are up approximately 1.875% from this time last year.

Shipping – the Cass Freight Index showed that shipping volume increased by 3% in March but is down year over year by 3.6%. A reduction in shipping volume can be an early indicator of recession.

Jobs – the number of people filing for unemployment for the first time increased slightly after hitting an all-time low. The number of people filing for continuing unemployment claims declined. The job market remains tight.

Inflation – the Producer Price Index – which measures inflation on the wholesale level – increased by 1.4% in March and is up 11.2% year over year. This is the highest level on record since this data started being tracked in 2010.

Mortgage Applications to purchase homes increased by 1.4% last week and are down 6.4% year over year. The number of cash buyers has increased which makes overall purchase activity down closer to 3%. With higher rates and record low supply, purchase demand continues to remain strong. Refinance applications dropped 5% last week and are down 62% year over year.

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