Market Comment
Mortgage bond prices rose last week pushing mortgage interest rates lower. We were negative through Thursday, as stocks performed generally well until Friday’s data was released. Fortunately, bond prices surged higher Friday morning following the weaker than expected payrolls component of the employment report. In addition, news of a troubled Hungarian economy reignited global fears and resulted in flight to quality buying of US debt instruments. Stocks fell precipitously Friday.

Rates fell by about 1/2 of a discount point for the week.

The retail sales data will be the most important release this week. The US Treasury auctions will also factor into trading along with the global economic uncertainty. The Euro remains especially volatile. If additional countries announce economic trouble the flight to quality buying of US debt instruments could continue.

Warning of Higher Rates
Last week Atlanta Fed’s Lockhart said that the Fed might need to raise rates to counter inflation even with high unemployment. “Good policy, even in circumstances of unacceptable levels of unemployment, may incorporate higher interest rates. The time is approaching when it will be appropriate to consider recalibrating interest rate policy.” He added, “as the economy continues to improve and financial markets find firmer ground, extraordinarily low policy rates will not be needed to promote recovery and will become inconsistent with maintaining price stability.”

Lockhart noted inflation remained under control for now. Now is a great time to take advantage of mortgage interest rates at these historically low levels to avoid future market fluctuation, especially with the recent rate decline and Fed predictions.