The Producer Price Index for April rose 1.4%, nearly triple the 0.5% expected. Year-over-year inflation moved from 4.3% to 6%. Let that sink in… 6% inflation.

A big chunk of the increase is tied to higher oil prices and tariffs working their way through the system.

There’s also another inflation component hiding in plain sight: the Fed printing money and buying short-term Treasury Bills. More dollars chasing fewer goods. That was a major driver behind the inflation spike we saw back in 2022, and markets are paying attention to whether history starts repeating itself.

But what does this mean for interest rates?

Mortgage rates are now riding shotgun with oil prices and geopolitical tension. If oil prices cool off, inflation pressure eases, bonds stabilize, and rates have room to improve. That’s the simple version.

But if the Strait stays closed or tensions escalate, oil climbs, inflation fears grow, and mortgage rates will likely keep drifting higher.

Right now, the bond market is trading less on optimism and more on the price of a barrel of oil.

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