EVERY DOG WILL HAVE HIS DAY…And as the “Dog Days” of summer carry on, Bond Traders found themselves chasing their tails all last week. Bonds traded in a choppy, see-saw pattern with prices down Monday, up Tuesday, down Wednesday, up Thursday, down Friday…and eventually finished up right where they started, leaving home loan rates unchanged overall.

Economic news for the week was mixed, but the biggest headliner was Wednesday’s Producer Price Index (PPI), which showed inflation heating up due to higher energy costs. Looking into the future, the rising price of oil may begin to fuel inflation even further. How? As higher costs to produce have just been seen in Wednesday’s Producer Price Index report, producers will eventually pass along the higher costs to the consumer…that’s inflation. This would be bad for Bonds and home loan rates, as inflation erodes the value of a Bond. Right now, inflation at the consumer level remains in check, but next month's Consumer Price Index report should be interesting, now that oil has spiked to record highs several times this month, and presently remains above $65 a barrel.

SPEAKING OF HIGH OIL PRICES – THE SKY-HIGH COST OF FILLING UP THE TANK IS JUST ONE REASON THAT SUV’S ARE BEGINNING TO FALL OUT OF VOGUE. FIND OUT THE OTHER SURPRISING REASONS WHY, AND WHERE AUTO MANUFACTURERS ARE FOCUSING THEIR ATTENTIONS NEXT.

Bonds have been attempting to get out of the doghouse and break out of the nasty worsening trend that has been in place since early June. But it won’t be easy. Remember, as Bond prices move lower, home loan rates move higher…now take a look at the chart below. You can see the repeating pattern where Bonds have traded sideways for five to seven sessions, and then stepped lower. This scenario has played itself out three times since June and appears poised for a fourth move lower.

With not much in the way of economic news on this week’s agenda to influence Bonds to move in one direction or another, they may follow the sideways to lower pattern in place since June. This will likely mean stable to higher home loan rates for the coming week.

I’VE FALLEN, AND I CAN’T GET UP…INTO MY SUV! Yes, it’s true – the Baby Boomers are starting to complain about their SUV’s, for reasons including the fact that they are tough for aging bodies to get into. And believe it or not, a recent “Kelley Blue Book” survey found that nine in ten Americans say that they don’t believe SUV drivers are patriotic, due to the large amount of gas being guzzled. Although SUV’s were the “it” vehicle for the past decade, they are starting to decline in popularity in favor of “crossover” vehicles, a best-of-breed combination between car and SUV.

So enter the crossovers, such as the Toyota Rav4, the Ford Escape and the Acura MDX. They have many of the features that people love about their SUV’s, such as more storage, while leaving behind some of the unfavorable features, like rough road handling. Boomers are also saying they no longer need a vehicle that can actually seat six to eight people – seating for four plus additional storage capacity seems to fit the bill quite nicely. And style is key – the crossovers run away from the large “boxy” look that SUV’s have worn, and instead offer a sleeker, sexier ride…still with room for groceries in back.

And it is now well known that SUV’s are prone to dangerous rollover accidents. This is due to the heavy vehicle having a high center of gravity, causing the swaying motion that can lead to a roll. The newer breed of crossovers are lighter and lower to the ground, making them less prone to a roll and easier to maneuver when attempting to avoid accidents.

If you are wondering how your SUV or vehicle might fare in the event of a collision or rollover, visit www.safercar.gov. You can actually view videos of how your vehicle held up in various crash tests, and review safety ratings for new and used vehicles.

This week's economic calendar is extremely light, with only a few reports due that could impact Bonds.

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 22 – August 26