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Mortgage bond prices fell last week pushing interest rates higher. Bonds traded within a narrow range as the data releases were mixed. Weaker than expected PCE, an inflation indicator, last Monday helped bonds start the week in positive territory. Unfortunately, stronger than expected factory orders and ISM index data later in the week erased most of the improvements.

For the week, interest rates on government and conventional loans rose by about 1/8 of a discount point.

The Fed meeting Wednesday will be the most important event this week. The Treasury auctions, trade data, retail sales, and producer price index data will also be important.

There are several drawbacks to the report. The data covers purchases of goods only, not services. It is also not adjusted for inflation and is extremely volatile.

Recent high gasoline prices could make this week’s release very volatile. Continued gasoline price increases may eventually result in increased inflationary fears and higher mortgage interest rates. However, increased oil prices can also result in a slowdown of the economy, which can put downward pressure on mortgage interest rates.

Despite the overshadowing Fed meeting this week, the retail sales data will still be relevant and has the ability to cause market volatility.