Last week's hopes for a mortgage-rate top are still valid, but the location may be closer to low sevens than high sixes. The latest over-target inflation report (May CPI core plus .3 percent) will likely force the Fed from 5 percent to 5.25 percent on June 29, and short-term Treasurys are beginning to price a 5.5 percent Fed in August. The Fed must proceed until the economy slows substantially, but the global unwinding of stock markets that began two weeks ago caused bonds to get ahead of themselves. The catalyst for the stock crater was Federal Reserve Chair Ben Bernanke's first tough speech, not an actual economic slowdown; when stocks reached technical support this week and rebounded, the 10-year T-note rose rapidly from its 4.97 percent low back to 5.1 percent and mortgages to 6.75 percent-plus. The consumer is showing some softening, evident in slower housing markets, and in this statistic: the gain in retail sales since February is entirely attributable to gasoline s...
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