Today the light week of data continues with the only somewhat relevant report being the release of oil inventories. This report is only relevant due to the inflation impact of oil prices. But this report will have no impact on mortgage backed securities.

MBS have continued to trend upward in price causing yield to drop(lower mortgage rates). Foreign stock markets overnight have sold off pretty big and it appears our Dow is going to follow suit. Usually when the stock market sells off the fixed income bond and treasury markets benefit; however, we are not in normal times.

Recent data regarding the libor rate, which is a rate that one bank borrows from another, shows that it is dropping. This is a good signal that the credit crisis is easing as banks are more willing to lend to each other.

Our float bias continues but as always you must consider your risk tolerance. We have had a very good run for the last few days and are due for a correction. A good analogy for this is imagine you are running, full sprint, at some point you need to take a breather. Well, over the last few days mbs' have been in full sprint and it appears that they might need a breather. If you are closing in the near future, locking today and removing all risk is not a bad call as you have picked up a lot of gains. Longer term closings, the risk of floating could pay off. But as stated many times, it is better to lock when you should have floated, then it is to float when you should have locked.