Mortgage rates continued their upward trend on Thursday, while Treasury bonds yields fell.

Markets seemed to be cheered by the fact that the Employment Cost Index for the second quarter was up 0.9%, only slightly higher than expected. New home sales rose to a record annual rate in June, according to the US Commerce Department.

The 30 year fixed rate averaged was up to 6.87% while the 15 year fixed rate average climbed to 6.56%. The 1 year ARM reversed its downward trend with an increase to 5.60%.

Treasury bond prices rallied on Thursday amid doubts about the ability of the new Japanese Prime Minister to turn around that country's economy. The yield on the benchmark 30 year Treasury bond fell to 5.72%.

Stocks rallied, with the Dow climbing nearly 112 points to close at 9026.95.