The Federal Reserve is moving toward new steps aimed at lowering interest rates on mortgages and other kinds of long-term loans, without making another massive infusion of money into the economy. When Fed officials hold a pivotal meeting in two weeks, they will strongly consider buying more long-term Treasury bonds, which should lead to lower interest rates for those bonds and other long-term investments. This would ultimately make it cheaper for businesses to borrow money for investments and push more dollars into the stock market, in addition to reducing rates on mortgages and other consumer loans. To pay for the bond purchases, the Fed would sell off some of the shorter-term bonds it already owns rather than printing new money. At their last meeting, Fed officials discussed whether to revive their earlier program of massive bond purchases, using newly printed money to buy hundreds of billions of dollars in securities as a way of pumping money into the economy. This discussion prompted wide speculation that the Fed might do it again. But now the consensus among Fed policymakers is jelling around the new strategy. While it might avoid some of the controversy that surrounded the bond purchases, including sharp criticism by some lawmakers and Republican presidential candidates, Fed officials expect the new approach to have a similar benefit for economic growth. The Fed’s policy committee will consider this and other strategies at its meeting on Sept. 20 and 21.

(Reuters) - MGIC Investment Corp's main mortgage insurance unit said on Wednesday it wrote more new insurance in August and the number of bad loans on its books fell from the previous month. The Mortgage Guaranty Insurance Corp wrote $1.3 billion in new insurance, among its highest levels this year, in a weak market for new mortgages. U.S. mortgage demand fell for a third straight week last week despite interest rates falling to near record lows. The largest mortgage insurer in the United States had 183,338 mortgages delinquent at the end of August, down from 185,093 at the end of July. Cures -- the number of mortgages on which borrowers were able to catch up on overdue payments -- also rose to 11,719. MGIC, like other U.S. mortgage insurers such as Radian Group Inc , PMI Group and Genworth Financial , underwrote millions of mortgages during the housing boom only to be saddled with billions of dollars in losses when loans soured. Shares of the Milwaukee, Wisconsin-based company closed at $2.29 on Tuesday on the New York Stock Exchange on Tuesday. The stock has lost more than 80 percent of its value since the beginning of the year. (Reporting by Jochelle Mendonca in Bangalore; Editing by Joyjeet Das)

From last night's MBS Commentary: "Any time TSY yields are rising or "risk-tolerance" is generally increasing, you're more likely to see MBS do this--hold their ground to against losses to a greater extent than Treasuries." That's generally what's occurring this morning as several overnight cues have weakened longer-dated Treasuries. 10yr notes are down 12 ticks in price while Fannie 3.5's are down 6 ticks in price (101-16). 10's are up just over 4 bps at 2.025. Fannie 4.0's are down in price 5 ticks to 104-09. There's no major economic data this morning and all we really have are a couple Fed speakers and the Beige Book at 2pm. MBS have been trending lower with Treasuries since the open so rate sheets could be slightly delayed as a result in some cases.