Mortgage bond prices fell last week pushing mortgage interest rates higher. Stocks generally showed strength throughout the week, which didn’t help mortgage bonds. Reports of Japan stabilizing their nuclear facilities resulted in a reversal of the earlier flight to quality buying of US debt. New home sales data came in weaker than expected which helped rates bounce back a bit mid-week. Unfortunately Fed Official Plosser’s comments Friday afternoon sent bonds falling and rates higher. Plosser indicated monetary policy will soon need to reverse course and that the preferred exit strategy would raise rates and reduce the Fed’s balance sheet concurrently. Mortgage bonds ended the week worse by about 3/4 of a discount point.
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