Concerns about the pace of global economic growth dominated the financial news this week. While investors sold bonds in troubled European countries, demand was strong for US bonds, and mortgage rates ended the week at new record low levels.

The economic data released this week reflected slowing economic growth in nearly every region of the world. The debt problems in Europe continue to create a drag on economic activity. China’s GDP fell during the second quarter to the slowest pace since the beginning of 2009. Last week’s US Employment data showed that the US is not adding jobs quickly enough to bring down the Unemployment Rate. The bad news for the economy was positive for bond yields and mortgage rates, though.

The detailed FOMC Minutes from the June 20 Fed meeting released on Wednesday disappointed investors hoping for signs of additional monetary stimulus in the near future. The Minutes did not reveal much support for a third round of quantitative easing (QE3) to boost the economy. Most Fed officials appear to believe that QE3 will be necessary only if US economic growth slows significantly. If we do get a new round of quantitative easing, investors expect it likely would consist of additional purchases of mortgage-backed securities (MBS) by the Fed. Since mortgage rates are largely determined by MBS prices, QE3 would be good for mortgage rates.

Next week, Retail Sales will be released on Monday. Retail Sales account for about 70% of economic activity. The Consumer Price Index (CPI), the most closely watched monthly inflation report, will come out on Tuesday. CPI looks at the price change for those finished goods which are sold to consumers. Housing Starts and the Fed’s Beige Book will be released on Wednesday. Existing Home Sales and Philly Fed will come out on Thursday. In addition, Fed Chief Bernanke will be testifying on Tuesday and Wednesday.

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