"LIFE IS A YO-YO…AND MANKIND TIES KNOTS IN THE STRING" (Anon.) And much like a yo-yo, Bonds and home loan rates saw a few swings last week…but what were the "knots" in the action? Bond prices have been on a brutal and relentless downward trend of late - almost like a "Down Escalator" - causing home loan rates to worsen in recent days. But Bonds attempted to muscle a move off the escalator on Thursday, and it looked as if they might make a break. But then along came the "knot in the string"…Friday's super-full slate of economic reports. The news brought solid numbers all the way around, and a blockbuster number for the manufacturing sector with a hot Chicago Purchasing Managers Index (PMI).

Remember that Stocks and Bonds typically tend to react in opposite directions to economic reports. Stocks have had a terrific ride on the "Up Escalator" in July, while Bonds and home loan rates have suffered.

The big PMI number shoved Bonds right back onto the "Down Escalator" on Friday, and caused home loan rates to worsen by about .125% across the board.

COMEDIAN VICTOR BORGE: "I DON'T MIND GOING BACK TO DAYLIGHT SAVING TIME. WITH INFLATION, THE HOUR WILL BE THE ONLY THING I'VE SAVED ALL YEAR!" AND DID YOU KNOW THAT YOUR EXTRA HOUR MIGHT LAST A WHOLE MONTH LONGER NEXT YEAR? DON'T MISS THIS WEEK'S IMPORTANT MORTGAGE MARKET VIEW.

So after trying to make a break from the "Down Escalator", Bonds were forced right back on the ride. And at the moment, it doesn't look very good for Bond prices and home loan rates for the week ahead. Take a look at the chart below. The long red "candle" on the far right shows last Friday's trading. A red candle indicates that Bonds closed lower on the day than they had opened, so you can clearly see that Bonds - and therefore home loan rates - had a tough day on Friday. Not only did they lose the gains made on Thursday, but were pressured to close at lows not seen since mid-April of this year.

Can anything reverse the trend and take Bonds off their slippery slope lower? Perhaps, if an important business report points to a slowdown in the economy…and the mother of all big economic reports due Friday by way of the monthly Jobs Report. A number that is out of line with estimates can change rate direction faster than you can change the time on your watch. The latest forecast is for 183,000 new job creations.

Bottom Line: The stage is set for home loan rates to increase a bit further. Unless the Jobs Report or other news headlines are real downers, home loan rates will likely continue to climb in the coming days.

Spring Forward…Fall Back - or is that Spring Back and Fall Forward? In any event, Daylight Saving Time may be springing a bit further starting in 2006.

House and Senate negotiators recently agreed to pass an energy bill that would extend Daylight Saving Time by one month - beginning earlier in the spring and extending later in the fall. Originally, the bill was written to extend Daylight Saving by two months, but farmers said it could have a negative impact on their livestock, and airlines could see that it might mean many missed international flight connections. Additionally, TV and Cable stations argued that they would lose viewers and revenue due to less time in front of the television because of more time outdoors in daylight. Therefore a compromise of one additional month of Daylight Saving was reached.

So why the change?

First, after making the adjustment to getting up an hour early, Americans overwhelmingly like Daylight Saving Time. There is simply more sunlight in the evenings to enjoy the outdoors and get things done. Additionally, there may be emotional benefits, as we typically feel better with more daylight.

The US Department of Transportation also found that increased daylight hours saved energy on a national scale. Less electricity is needed, as fewer lights are turned on as early in the evening.

Last but certainly not least, brighter is safer. Drivers and pedestrians are significantly less likely to incur road accidents due to decreased visibility after sundown.

The week kicks off with a potentially high impact report on the current status of manufacturing in the US, and ends with the nearly always explosive monthly Jobs Report.

Remember, as a general rule, weaker than expected economic data is good for rates, while positive data causes rates to rise.

Economic Calendar for the Week of August 01 - August 05