Mortgage bonds, after rallying in the face of inflation figures from CPI and PPI that would normally force mortgage rates upward, lost some steam later in the week and finished on Friday only slightly improved. This left mortgage rates mostly unchanged to very slightly better for the week.
Expect the markets to test Fannie Mae and Freddie Mac this week. The mortgage giants are under continuous and ongoing pressure, and we may see the Federal Govt step in some manner or fashion to recapitalize them in the coming weeks.
Though anything can happen, this might help mortgage rates. Direct monetary intervention by the Federal Government should help narrow the widening spreads (spreads are the markets way of telegraphing perceived risk – the larger the spread between a "risk free" treasury security and mortgage backed securities, the more risk the mortgage securities are assumed to have) between mortgage and treasury securities, thereby bringing mortgage rates down. Maybe.
The economic calendar this week holds some key data points for the markets to digest – Home sales (existing on Monday, new on Tuesday) and the minutes from the last Fed meeting (Tue) hit early in the week, while Friday brings the GDP report and a key gauge of inflation known as the PCE, or Personal Consumption Expenditures index – any signs of inflation here could make things worse for mortgage rates.