The Empire State Mfg Index fell to record low of -25.76, from -25.43 in November. Consensus was for a steeper drop to -27.50.  No appreciable reaction from MBS on this data...

Some of the data however was better than expected as The Fed reported a 0.6% drop in November industrial output, less than the consensus 0.8% drop.  Here too, no response from MBS.

MBS are coming off a very good week last week, and we don't expect the positivity to wane, although the Fed Meeting this week should give markets reason to pause before moving forward.  Over the past weeks, it's only been the GSE buying, mandated by the Fed that's kept things in the green.  We still have the $500bln of Fed buying to look forward to.  Knowing the Bond Markets, that positivity will not be priced in until the dollars actuallys start to hit.

Moreover, it appears with last week's buying that specific price/spread levels are acting as "buy signals" for the government.  When spreads and price started to track back a bit last week, the government came in via the GSE's to buy which kept the numbers steady.  This is a remarkably reassuring thing for MBS and not at all the sort of 'backstop' we are used to playing with.  Barring headline-related catastrophe, this backstop should stay in place providing us a good foundation from which to float going forward.

As funding lines and personnel challenges adjust to the new rates, lenders, independently of MBS price, will also have room to lower rates a bit.  So good old fashioned Float Club is in session.  Stay tuned for intraday price changes and as always, we'll be reassing the day that was versus the day to come to see if short term locks are warranted.

Current pricing:

4.5's 100-30

5.0's 101-25,

both within a tick of Friday's close.