Mortgage bond prices fell last week pushing mortgage interest rates considerably higher. The weakness followed Fed Chairman Bernanke’s remarks indicating inflation risks are on the upside. Global economic growth, inflation fears, and the European Central Bank rate hike resulted in a diminished appetite for US backed securities from foreign central banks. This initial selling pressure snowballed resulting in US based fixed income securities taking a beating. For the week, interest rates on government and conventional loans rose by about 1 full discount point.
The consumer price index Friday will be the most important event this week. The Treasury auction, retail sales, Fed “Beige Book”, producer price index, industrial production, capacity use, and consumer sentiment data will also be important.
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