As mortgage bonds sold off early in the week, sharp rate hikes followed. A steady stream of better-than-expected economic reports had re-ignited inflation fears, drawing money from the bond market.

On Friday, however, the money flow reversed on a triple threat to the U.S. economy:

1. The Unemployment Rate took its biggest one-month jump in 22 years
2. Oil made its biggest one-day gain
3. The U.S. dollar lost a lot of value

By themselves, each of these events normally would be bad for mortgage loan rates but the Friday combination of all three led to a huge stock sell-off and renewed demand for bonds -- including the mortgage-backed kind. 

Despite Friday's reversal, mortgage rates were higher on the week, overall.

This week, there won't be much economic data this week but there will be six Federal Reserve members making speeches to the public. 

The most anticipated of the set is Fed Chairman Ben Bernanke's address Monday evening on the topic of "inflation".  Markets will be closed when Bernanke speaks so expect a delayed market reaction Tuesday morning.

Throughout the week, markets should continue their long-standing battle between the fears of inflation and the fear of recession.  It's the same back-and-forth that we've seen since late-2007.

It's also the primary reason why mortgage rates rarely stay still anymore.

(Image courtesy: The Wall Street Journal Online)