Yesterday mortgage backed securities had another rather boring day.   They traded in a very tight zone and closed about were they opened.  There is not much motivation currently to drive the price of MBS higher which results in lower mortgage rates.   So far this morning, MBS have opened down just a couple ticks and we should see similar rate sheets this morning as we had yesterday keeping par 30 year conventional mortgages anywhere from 4.625% to 4.875%.  At the current price levels of MBS, we should be seeing lower mortgage rates; however, lenders do not have the capacity to handle more business so they are reluctant to pass along lower mortgage rates. 

Today we are getting the release of some economic data.  First, already out is the durable goods orders which gives investors insight into the strength of the economy as orders for durable goods indicate how busy factories will be in the months ahead.   Economists were expecting a decline of -2.0% but the number came in considerable better at an increase of 3.4%.  Normally, this would lead to investors selling MBS and treasuries and move money into the stock market; however, this hasn’t happened this morning.  The main reason for this is January’s numbers were revised worse from a decline of -4.5% to a decline of -7.3%.  So, the revisions have basically offset the positive report.  Next, we are getting new home sales.  Economists are expecting an annual pace of 300,000 after last months 309,000 pace.   With the glut of housing on the market, I would like to see this number come in close or lower than expectations.   Lastly, we are having another round of treasury auctions.  This time auctioning off $34 billion of 5 year Treasury notes.  The auction yesterday of 2 year notes saw very large foreign demand for our US treasuries which is what we look for after these auctions.   With the added supply of debt on the market, it could drive treasury yields higher which might result in MBS moving higher in yield which increases mortgage rates.  Also today Secretary of Treasury Tim Geithner will be speaking to the Council on Foreign Relations and as always his comments can have a major impact on all markets.

Since typing this update, MBS have moved to unchanged levels from close yesterday.  Early reports from fellow mortgage professionals are showing lenders rate sheets to be slightly better than yesterday.  I will get back to you later today with an update.