A combination of factors was negative for mortgage markets last week, and mortgage rates ended higher. Large budget deficits and economic troubles in smaller European Union nations made bonds less attractive to global investors. In addition, stock market gains sent the Dow to an 18-month high, which pulled funds out of fixed income investments. Finally, with just one week remaining for the Fed’s mortgage-backed securities (MBS) purchase program, comments from Fed Chief Bernanke about potential future MBS sales added to the pressure in mortgage markets. For months, investors have been concerned that the enormous supply of debt needed to fund US government spending would force yields on US Treasury securities to rise to attract purchasers. This is what took place this week. Demand was surprisingly weak at all of this week’s record Treasury auctions, especially from foreign investors, and yields were pushed higher. Since MBS compete for investors with Treasuries, MBS yields rose as well, pushing mortgage rates higher.