Mortgage bond prices rose, pushing mortgage interest rates lower. Inflation fears were tamed a bit the early portion of the week as the core producer price index came in exactly as expected. Oil prices remained volatile, but did not push significantly higher. Stocks took a beating, which helped bonds post some nice gains. The DOW dropped below 12,000. For the week, interest rates on government and conventional home loans fell by about 3/8 of a discount point. The Fed meeting Tuesday and Wednesday will be the most important event in the coming week. There is an abundance of other data that may also move the market. Expect oil prices to continue to factor into trading, as inflation fears remain. This next week will bring significant data. However, the results of some of the releases may be muted a bit considering they take place after the Fed meeting adjourns Wednesday. Nonetheless, the inflation release still has the potential to result in market swings, so caution is the key. Remember that market sentiment can turn very quickly as has been evident recently. Mortgage bonds could see some volatility ahead of the Fed announcement. It is a safe bet that nobody wants to get caught behind the market if it does make a huge correction following the release. The Fed will set the tone for trading the remainder of the week. If the Fed notes even more concern than they already have regarding inflation, then expect volatility heading into the inflation release. If the PCE Core Inflation shows inflation pressures, it is likely that bonds will see sharp declines resulting in additional spikes in mortgage interest rates. The risks associated with floating ahead of this next week’s Fed meeting are high. Lock now if you are closing in the next month. | 
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