Mortgage rates and other long-term interest rates are bound to rise measurably in the second half of this year, if not earlier. The Federal Reserve has been aggressive in buying U.S. government bonds as part of Quantitative Easing and has tried to hold down the long-term rates with Operation Twist. But both measures will soon be coming to an end. Furthermore, there will inevitably be a reversal of these policies at some point, which means the Federal Reserve will be selling back the bonds it had already purchased and sitting on the balance sheet, probably at the same time the U.S. government will continue to sell its bonds to cover the deficit spending. That means someone has to buy the flood of U.S. government bonds. If there is a lack of investors, then higher interest rates will be required to induce buyers to step forward. Higher offered interest rates also mean higher mortgage rates as well.
Every week the Research staff analyzes key data releases and explain what they mean for you and your business. In this update, we give the highlights of the most important data releases for the week of August 22-August 26, 2011, along with graphs that show the latest movement and overall trends.