Bonds and mortgage backed securities had a rocky week last week ending with a hammering on Friday believed to be caused by Bernanke’s comments that the economy continues to improve although it is happening very slowly.  Bernanke also indicated that the Fed is ready to step in with more quantitative easing if necessary.  Some experts believe that the economy won’t truly begin to improve until the housing markets stabilize and job security increases.  Neither appears to be likely until at least the end of 2011.  Mortgage prices crashed Friday on the news dropping 57 basis points, only to gain 59 basis points Monday.  HUD secretary Sean Donovan has indicated that there has been recent talk of exploring the possibilities of bringing back a home buying tax credit after the most recent one appeared to artificially inflate the housing market only to go back to where we were once it expired.  The market opened a little bit better Monday as the key stock indexes opened the day trading weaker.  Mortgage backed securities continued to gain steam Monday causing many lenders to re-price interest rates for the better.  They continued the rally Tuesday morning with the 30 year opening about 15 basis points higher. 

There was not much in the way of data yesterday other than the July personal income and spending report.  Income came in up .2% while spending was also slightly better up .4%.  Lots of news due out this week highlighted by the Weekly Jobless Claims and July Pending Home Sales on Thursday followed by the big one – August Unemployment due out Friday morning. 

The good news from the mortgage rate side is that there really isn’t any strong evidence indicating rates will increase while the economy continues to struggle.  Stock, bond and mortgage markets should continue to see extreme volatility this week.

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