At the time I am writing this mortgage interest rates are almost unchanged from last Friday, although we might see a re-price for the worse this afternoon.

Yesterday afternoon and this morning we saw a big sell off in the mortgage bond market. The main fuel behind this sell off was optimism in Europe. Part of the reason rates have been so low lately is that Europe has been struggling with their debt problem. Fears that some countries in Europe might default on their debt has caused investors to pursue safer US investments such as mortgage bonds. Today it was announced that 278 European financial institutions will return 137.2B euros for early repayment of their emergency loans from the EU. Economist had predicted that only 84B euros would be paidback early. The fact that the European banks are able to pay back the money they borrowed early is a sign that the debt crisis is moving in the right direction, but many economists are warning that is far from over.

Next week the Federal Reserve Board (FED) will meet to discuss Fiscal policy. Investors will be monitoring meetings closely as last month's meeting minutes shocked the market as they indicated the FED had discussed stopping quantitative easing (QE). QE is the practice of buying mortgage bonds and treasuries to artificially deflate interest rates. I don't believe we will see QE come to an end any time soon, but at some point it will have to and any discussion of it by the FED tends to spook investors.