Today is a very light day for economic data with the only relevant report being pending home sales index at 10am est., this report is unlikely to have much affect on mortgage backed securities. So far this morning, mbs are up 4 ticks from close yesterday, and they have been holding steady over the last few days.
Something new that happened yesterday was an added mbs coupon, the 4.0. Does this mean that investors feel rates will continue to drop? We shall see in the weeks and months ahead, but it is definitely a good sign that lower rates are ahead. The only question is how low will rates go? We do have a pretty good floor of support beneath us which should prevent any massive sell off and we have a layer of resistance overhead which should be difficult to break through. We appear to be range bound until the government starts buying mbs with the $500 billion they announced a couple weeks ago. As we approach the ceiling, it may be a good time to lock in short term deals, but longer term deals(closing in Jan or beyond) you are probably still clear to float. We should see slightly better rate sheets this morning then yesterday. If you have a short term deal, do not lock this morning. Allow time for a rally to maybe cause lenders to reprice to the better but at lender cut off short term loans really need to be looked at for locking.
We’ll get back to you if mbs start a nice rally or a sell off. As for right now, mbs are holding at 100-29 which is 4 ticks up on the day.