“FIRST THE DOCTOR TOLD ME THE GOOD NEWS. I WAS GOING TO HAVE A DISEASE NAMED AFTER ME” Steve Martin… And Bonds love that kind of news as well – seemingly “negative” news items can be great news for Bond prices and home loan rates. As you may have heard, Greenspan and his inflation-fighting friends at the Fed decided once again to raise the Fed Funds Rate by .25%, the tenth such increase since starting their rate hike cycle last summer. Although many people equate rate hikes with bad news – this was great news for Bonds. Since inflation erodes the value of a fixed return Bond, this anti-inflationary move helped Bonds and home loan rates begin to move in a positive direction.

To round out the week, a Treasury auction on Thursday was very successful, showing that big-buying foreign central banks still have a healthy appetite for US Bonds. Finally, a few mildly weak economic reports pulled money from Stocks into Bonds on Friday, overall helping home loan rates improve by about .125% on the week.

A welcome step in the right direction…but don’t pop out the champagne and dance in the streets just yet. Bonds were able to poke their nose off the brutal downward channel that has caused home loan rates to trend higher in recent weeks, but it’s not a very convincing move quite yet. And some battles are in store as Bonds attempt a break. Read on to find out what lies in wait, as Bonds and home loan rates attempt improvement in the coming week.

DID YOU KNOW THAT MORE MONOPOLY MONEY HAS BEEN PRINTED BY PARKER BROTHERS GAMES THAN THE FEDERAL RESERVE HAS ISSUED IN REAL MONEY FOR THE ENTIRE UNITED STATES? FOR MORE INTERESTING FACTS ABOUT WHAT’S IN YOUR WALLET, READ THIS WEEK’S MORTGAGE MARKET VIEW.

So Mortgage Bonds finally caught a break, and worked hard to muscle higher last week…helping home loan rates improve slightly. But what are the chances that Bonds can muster up the strength to make a clean break away from the ugly “Down Escalator” they’ve been riding for the past six weeks? Take a look at the chart below. Just overhead, quietly lying in wait for Bonds are many tough levels of technical resistance. To move higher and permit home loan rates to slide lower, Bonds would have to power through these ceilings. Could it happen? This coming week will bring quite a few moderate to high impact economic reports for Traders to act on, including a look at the housing market on Tuesday. Economic news of late has been overall fairly positive, but if this week should happen to bring a few “clinkers”, it will help Bonds gain some momentum to battle the tough resistance that awaits.

Bottom Line: With heavy technical resistance pressuring Bonds and home loan rates to stay near present levels, it will take some very negative economic news to bring much improvement this week.

THE BUCK STOPS HERE…BUT WHY IS A DOLLAR CALLED A BUCK? Before the days of paper money, Americans traded animal skins, including deer and elk bucks, for goods and services. Hence the word "buck" to describe money…and here are a few other fun facts about money.

• During the Civil War, the Bureau of Engraving and Printing was first called upon to print paper notes in denominations of 3 cents, 5 cents, 10 cents, 25 cents and 50 cents. The reason for this is that people hoarded coins for their intrinsic metal value, which created a drastic shortage. These first bills, called greenbacks, were used to pay Civil War soldiers.



• Martha Washington is the only woman whose portrait has appeared on a US currency note, appearing on the face of the $1 Silver Certificate of 1886 and 1891, and the back of the $1 Silver Certificate of 1896. There have not been any women featured on US paper currency in the entire 20th century.



• Why are US notes green? No one is really sure. However, in 1929, when the Bureau of Engraving and Printing began making smaller size currency, green was continued because pigment of that color was readily available in large quantities. The color is relatively high in its resistance to chemical and physical changes, and green has now been psychologically identified with the strong and stable credit of the US government.



• The origin of the dollar sign — $ — has various explanations. The most widely accepted is that it is the result of the evolution of the Mexican or Spanish "PS" symbol for pesos. This theory, derived from a study of old manuscripts, explains that the S gradually came to be written over the P, developing a close equivalent to the $ mark. It was widely used even before the adoption of the United States Dollar in 1785.



• Contrary to popular belief, the automobile pictured on the back of the $10 note is not a Model T Ford. It is simply a drawing by the person who designed the bill.



• The United States Secret Service was originally formed in 1865 to combat counterfeit money. At that time, as much as one-third of all the money in the United States was estimated to be counterfeit. Currently, about $250,000 in counterfeit money still appears each day!



• Did you know that a quarter has 119 grooves around the edge, and a dime has 118? And do you know the purpose of the ridges on the edges of coins? Without ridges, it is possible to scrape metal off coins without it being obvious. In the days when coins were made of silver or gold, a person could have made a good, but illegal, living from shaving coins and selling the precious metal.



• How long does money last? The Federal Reserve System lists that a $1 bill lasts about 22 months; $5 bills for 2 years; $10 bills for 3 years; $20 bills for 4 years…while $50 and $100’s enjoy a relatively long life of 9 years. Coins, on the other hand, generally stay in circulation around 30 years.

Along with several high impact reports throughout the week, the market will also get the latest view on the strength of the housing sector with Housing Starts and Building Permits on Tuesday.

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 15 – August 19