Throughout the feverish activity on Wall Street last week, mortgage bonds sold off with force, driving mortgage rates to their highest levels since July. It was the fourth straight week in which mortgage rates worsened.
But, with the mortgage markets closed Monday, stock markets rallied to their largest one-day gain in history.
The Dow Jones' gains are expected to push mortgage rates down today, but not nearly enough to recover last week's losses. The market-wide carnage was mostly the result of a fear that has not been completely removed from investor psychology.
Until that fear is purged, therefore, expect mortgage rates to move on the dual basis economic data and market mentality. This will likely lead to rapid rate changes that will make shopping for a mortgage rate difficult.
This week, look for key inflation data including the Producer Price Index on Wednesday and the Consumer Price Index on Thursday.
Both measure the "cost of living" and reflect on price pressures in the economy. If costs are rising, it's considered inflationary and that tends to edge mortgage rates higher.
In addition, Retail Sales and Consumer Confidence data will be released this week, and carefully watched. If either (or both) show strength, markets may interpret the data to be inflationary as well, further adding upside pressure to mortgage rates.
(Image source: The Wall Street Journal)
