So far this morning, mortgage backed securities are up on the day following yesterdays gains. The volume continues to be very light so any large trades can have a bigger impact on overall pricing for the day. The market closes early at 2pm eastern and will be closed all day tomorrow and closes at 2pm on Friday.
Now to the data
- Durable Orders, this reports the number of new orders placed with domestic manufacturers for goods that are expected to last for at least 3 years. Economists where expecting a drop of -3.1% but the number came in better at -1.0%, this is a negative for mbs.
- Jobless Claims, economist expecting 550,000 but number came in worse at 586,000. This is a positive for mbs as more unemployed people leads to less wage based inflation. Employers do not have to attract new employees by paying more, they can just offer a job. The 4 week moving average remains at a 26 year high of 558,000 and the continuing claims slightly improved from last week to 4.36 million.
- Personal Income, economists expecting 0.0% but number came in worse at -0.2%, mbs positive since consumers have less money to spend to spark economy and bad news for the economy is generally good news for mbs market and lower mortgage rates.
- Personal Spending, economists expecting a drop of -0.8% but number came in slightly better at -0.6%.
All in all, the economic data was favorable to mbs, but with today being Christmas Eve, most traders are on vacation so the day should be pretty insignificant. In some other news, mortgage applications have increased over 60% from last month due to interest rate drop, oil continues to fall currently trading at $37.38 a barrel and dow futures are up slightly. With the markets being closed, we will not do an update tomorrow but will be back on Friday. No economic reports will be released on Friday and with an early close, don’t expect anything big to happen. I suspect that we will continue to move sideways until years end. Currently the 4.5 mbs current coupon is trading up 5 ticks on the day.
I wish everyone a Merry Christmas and I hope you get to spend time with your friends and family.