Market Comment - Week of March 29th, 2010
Mortgage bond prices fell last week pushing mortgage interest rates considerably higher. The Treasury auctions resulted in poor foreign demand for US debt instruments. Unfortunately that carried over into the mortgage backed securities market causing prices to fall and rates to rise. The data hurt us with weekly jobless claims coming in better than expected and existing home sales also beating estimates. Durable goods orders data was mixed with ex-transportation figures considerably stronger than expected. Rates rose about 5/8 of a discount point for the week.
Personal Consumption Expenditures
The personal consumption expenditures price index is a measurement of the average increase in prices for all domestic personal consumption. The Bureau of Economic Analysis creates the report. The release is the preferred measure of inflation of the Federal Reserve. The 2000 Monetary Policy Report to the Congress indicated, "the Federal Reserve Board's semiannual monetary policy reports to Congress have described the Board's outlook for inflation in terms of the PCE. Prior to that, the inflation outlook was presented in terms of the CPI." The report went on to note "the PCE chain-type index is constructed from a formula that reflects the changing composition of spending and thereby avoids some of the upward bias associated with the fixed-weight nature of the CPI. In addition, the weights are based on a more comprehensive measure of expenditures. Finally, historical data used in the PCE price index can be revised to account for newly available information and for improvements in measurement techniques, including those that affect source data from the CPI; the result is a more consistent series over time."
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