Mortgage bond prices had the worst week in a very long time falling precipitously pushing mortgage interest rates considerably higher. Stronger than expected consumer sentiment data started the bond market off on the wrong foot. Debt supply concerns permeated throughout the financial markets with the US Treasury auctioning $100 billion of notes. Escalating oil prices added fuel to the fire. Fortunately it appeared the Fed finally stepped in to stop the bleeding towards the end of the week helping bonds recover a small portion of the large losses from earlier in the week. For the week interest rates rose by about 1 and ½ of a discount point.

The employment report Friday will be the most important release this week. If the data shows signs of economic recovery we could see rates pressured higher. However, signs of weakness may bode well for rate improvements.

Productivity is the rate at which goods or services are produced. It is most commonly defined in terms of labor, which is the contribution of people to the process. Labor costs represent about two thirds of the value of the output produced. The Bureau of Labor Statistics of the US Department of Labor releases the most widely cited productivity statistics quarterly and annually. Increased productivity is often credited for economic growth with little signs of inflation.

Productivity is significant in that as it increases, businesses can produce more with the same or less input. This wealth building effect is vital to the US economy. As productivity increases, the US economy generally performs better. As productivity decreases, the economy generally suffers.

While the bond market generally favors signs of weakness in the economy, bonds tolerate growth as long as the economic environment shows little or no inflationary pressures. Unfortunately, inflation fears have escalated as of late.

Keep in mind that rates remain very favorable. Now is a great time to avoid the uncertainty surrounding continued market volatility.