The week that was:

FNMA 4.5% coupon went up 53 bps for the week, improving mortgage rates. August durable goods orders fell 2.4%, largest decline for this series since January. Existing home sales dropped 2.7% in August on a seasonally-adjusted basis the first decline in five months; but the University of Michigan final index of consumer sentiment increased to 73.5 in September, the highest level since January 2008.

FOMC Policy Statement: Information received since the Federal Open Market Committee met in August suggests that economic activity has picked up following its severe downturn. Conditions in financial markets have improved further, and activity in the housing sector has increased. Household spending seems to be stabilizing, but remains constrained by ongoing job losses, sluggish income growth, lower housing wealth, and tight credit. With substantial resource slack likely to continue to dampen cost pressures and with longer-term inflation expectations stable, the Committee expects that inflation will remain subdued for some time.

Treasury successfully sold $112B of notes with relatively strong demand. Demand for US securities, particularly US Treasuries, is the global bet the economies of the world are on the recovery path. No one is completely sure; so the best bet in uncertain times based on historic thinking is to park money in the safest conceivable place; US bond markets.

The Week that will be:

Next week its monthly employment on Friday that will take most of the attention. (Early estimates floating around are for job losses to drop substantially to 160K from August decline of 216K) Next week is the end of Q3 and may provide some increase in market volatility. Most of the focus through the week will continue to be on the potential of a stock market correction; nothing new there, markets have talked of nothing else for the past few weeks, but so far no cigar. The benefit of a swing lower in equities is lower interest rates and opening the door for more re-financing opportunities.