At the time I am writing this, mortgage interest rates are almost 1/8th lower than they were last Friday.

This week mortgage bonds broken out of the tight range they have been trading in. On Monday we saw a sharp selloff in the stock market which drove mortgage rates down. This sell off was sparked by negative news out of Europe. The main piece of news was that the Italian elections were a mess. The outcome of the election was that the power was split between two parties with different ideas on how to deal with the financial crisis. With Italy being one of the countries that are at default risk, investors saw political uncertainty as a big negative.

After the big sell off on Monday the stock market recovered it losses the following days and on Wednesday it closed just 89 points shy of its all-time high set back in 2007. So far it has not been able to break that all time high, but the fact that we are this close to it shows that investors are confident in the economic recovery. On Tuesday and Wednesday the Federal Reserve (FED) president Ben Bernanke did his semiannual testimony in Washington. At the testimony he reassured that the Fed will continue to keep interest rates low for as long as needed and that they will give clear signals ahead of changing this policy.

Looking forward the US government will run out of money on March 27th unless the debt ceiling is raised again. As usual our two parties in Washington don't agree on how to solve this problem.