The stock markets faced large losses last week and the bond market was a beneficiary.  That was good news for mortgage rates, but the news could have been better.

Unnerved by losses in the sub-prime market, investors are beginning to question the safety of mortgage bonds overall.  Once considered a “safe” investment, mortgage bonds may be losing their luster and that could drive mortgage rates higher. 

Less demand for mortgage bonds forces mortgage rates up.

This week, markets should stop taking their cue from “sentiment” and instead focus on actual data.  There’s a lot of inflation-related news coming up.

Tuesday is the first big data day of the week, featuring Personal Consumption and Expenditures (PCE) and the Employment Cost Index.  The former answers “What is the cost of living for ordinary people?” and the latter answers “What is the cost of keeping a workforce?”.

Increases in either will be viewed as inflationary which should contribute to a rise in mortgage rates.

Then, on Friday, the Bureau of Labor Statistics will release the jobs report from July.  Markets are expecting 135,000 new jobs created, a 3,000 increase over June 2007. 

As always, though, the real story in the Non-Farm Payrolls report is not the headline, but the upward or downward revisions to May’s data and June’s data.

It’s been a wild ride for mortgage rate shoppers lately.  This week does not figure to get any smoother.

(Image courtesy: Seeking Alpha)

Tony Gallegos – Serving the mortgage needs of Kennesaw, Marietta, Roswell, Smyrna, Powder Springs, Dallas, Acworth, Woodstock, Douglasville, Hiram, Austell and Atlanta. Subscribe to The Mortgage Cicerone:

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