Interest rates had an interesting week last week.

They were absolutely crushed by almost 0.25% on Friday, yet mortgage rates improved on the week and traced all-time lows on Thursday afternoon.

The news that pushed rates lower and higher through the week was the same–consistent revisions to economic projections.

Early in the week, the news was bad.  We saw Existing Home Sales plummet 27%, New Home Sales drop 12%, and big ticket consumer purchases were also lower.

Then Friday, we had a dose of good news.  While Q2 was revised lower, it wasn’t revised as low as the pundits had thought.  Fed Chairman Ben Bernanke’s talk also pushed stocks higher while he spoke about a continued expansion in GDP through the end of this year and into 2011.

My nod for best quip of the week was from John Mauldin, who was talking about our “three-handed economist” repeating our Fed Chairman’s “on the one hand, but on the other hand, and then on the other!”

The bottom line is that when Bernanke speaks, the market listens.  What they were listening to appears to be the odd part of last week’s recap.  It was more Greenspan-ish than Bernanke-ish in its word patterns.   If you read it multiple times, you’ll interpret it differently each time.

This Week’s Mortgage Rate Predictions

It is a coin flip.   There is a lot of data hitting the market this week.  It touches key inflation figures, home value data from Case-Shiller, the Fed Minutes, and Friday’s jobs report.

Since April, mortgage rates have been following a trendline that is as unprecedented as it was unexpected.  That may well continue this week, but it might not.  There has been activity on Wall Street, but it is just churning.   While the fundamental question is the direction of the US economy’s direction, Wall Street doesn’t appear to be making bets that last more than a few hours.  What we have not seen in the past few months is conviction.

Last June, rates jumped 1.125% in 10 days.  That is staggering.   We’re still in a spot where perhaps rates do dip another 0.125% or 0.25%, but that still leaves five, maybe even ten, times as much risk in rates going higher than value in them going lower.