Bond markets got a small boost on the Producer Price Index

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Published Date 7/16/2025

Yesterday June consumer prices increased compared to May prices, sending stocks down. The thoughts of a Fed rate cut lessened, no cut at the July meeting at the end of the month and possibly no cut at the September meeting with inflation edging higher.

This morning June wholesale prices (PPI) were soft, meeting expectations. Month/month PPI forecasts at +0.2% were reported unchanged from May (May revised from +0.1% to +0.3%), year/year thought to be +2.5% were +2.3%, the lowest since September 2024. The core (ex-food and energy) forecast +0.2% reported unchanged from May, year/year expected at 2.6% reported at +2.6% but down from +3.0% in May. Ex food, energy, and trade services 0.0% from +0.1%, year/year +2.5% from +2.7%. Prices of services were down 0.1%, after increasing 0.4% in May, led by a 4.1% plunge in prices for traveler accommodation services. The indexes for automobiles and automobile parts retailing, deposit services, airline passenger services, and food and alcohol wholesaling also decreased. Meanwhile, prices of goods rose 0.3%, the most since February, mainly boosted by a 0.8% increase in communication and related equipment.

The reaction to the soft wholesale prices pushed the 10 year down 3 bps from +5 bps yesterday to 4.46%; MBS prices lost 19 bps yesterday, on the PPI reaction this morning +12 bps.

After improvement in mortgage applications two weeks ago, last week apps declined; the composite down 10.0%, purchase apps -11.8% from +9.4% and re-finances -7.4% from +9.2%. It was the sharpest decline in nearly three months (month to month).

So far this year consumer prices and wholesale prices imply the tariffs are not adding much pressure on prices. It is still early, and a number of tariffs have not yet been in play keeping the Fed cautious about cutting rates.

At 9:15 am June industrial production and capacity utilization (factory use) production expected +0.1%, cap utilization 77.4%. Production reported at +0.3%, cap utilization 77.6%. May production revise from 0.0% to +0.1%, utilization in May revised to 77.5% from 77.4%.

At 9:30 am the DJIA opened +148, NASDAQ +47, S&P +17. 10 year at 9:30 4.47% -2 bps. FNMA 6.0 30 year coupon at 9:30 am +10 bps from yesterday’s close and -15 bps from 9:30 am yesterday.

At 2 pm the Fed’s Beige Book, details from the 12 Fed districts, good reading but usually doesn’t cause much movement.

Source: TBWS

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Clark Aliano

Branch Manager / Certified Mortgage Advisor

NMLS: NMLS ID: 252422

The Aliano Group at C2 Financial Corporation

2447 Pacific Coast Hwy, Ste 200, Hermosa Beach CA 90254

Company NMLS: 135622

Office: 800-363-5600

Cell: 310-430-0486

Email: Clark@TheAlianoGroup.com

Web: https://www.TheAlianoGroup.com