Daily Market Update 6/12/09

Mortgage rates eased for the first time in several days Friday following strong demand for this week’s Treasury auctions. Behind the recent rise in mortgage rates has been an improved economic outlook and concerns about the enormous supply of new debt needed to pay for government programs. This leaves the Fed in a difficult position. Fed officials would like to keep mortgage rates low, but to accomplish this, would have to increase purchases of mortgage-backed securities (MBS). Doing so would add even more debt, fueling inflation concerns. Most analysts believe the Fed is unlikely to expand its MBS purchase program.

The most significant economic data next week will be the monthly inflation reports. The Producer Price Index will come out on Tuesday, the Consumer Price Index on Wednesday. In addition, Housing Starts and Industrial Production will be released Tuesday.

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