Today we had the release of a couple economic reports that generally have market moving impact. First was the weekly jobless claims. Economists where expecting the number to be at 420,000 but it came in at 444,000 but the more important continuing claims stayed above the 3.4 million number. This helps MBS as higher unemployement allows for companies to hire new people at a smaller wage. It is the law of supply and demand, more people looking for a job, the less has to be paid but if few people are looking for a job, companies will have to attract them by paying more money. This refers to what is called wage based inflation. As payroll is the biggest expense to most companies, if companies have to pay more money to hire someone, they will pass that higher wage onto the consumer pushing prices higher which is inflation. As stated many times on this and our professional blog, the biggest enemy to mortgage rates is inflation. The other economic report helping us today is the productivity report. This report shows how efficient labor is at producing goods and services. Economists where expecting a reading of 3.5%, but the report beat estimates and came in at 4.3%. This shows higher productivity which is good news for inflation as it shows the employers can produce more goods and services with the current workforce and they do not need to hire more or increase pay.

It appears that today is a good day to be floating as MBS pricing is up(remember as MBS pricing goes up, rates come down) on the day by around .125 in discount. We have been on another winning streak and MBS can become the victim of profit takers who might start to sell. If you are closing in the next week or so, you can lock in the gains of this week and take all risk out of the equation. For longer term closings, floating looks like it may pay off even though we are due for a slight, and we think temporary correction. Tomorrow does bring us one of the most important days of the month as it relates to MBS pricing. Tomorrow morning we will get at 8:30 eastern the nonfarm payrolls. This report will show us the number of new jobs created or the number of jobs lost. Economists are expecting the number to come in at a loss of 75,000 jobs. If the number comes in higher(meaning more jobs lost then 75,000), that should help us to remain on a winning streak. If the number comes in better, we might see some selling pressures. If you believe the number will be worse, floating makes sense. If you believe the opposite, locking later today will be the safe bet. As always, it is safer to lock and take your gains now as you will be much more upset if you float when you should have locked then if you locked when you should have floated.

We will post again if we start to see profit takers jump in later today to bring MBS's down as some might do this to hedge against the reports coming out in the morning. As always stay tuned to this blog or click over to the professional blog where you will find more technical analysis.