Ok everyone get a good stretch, shake off the holiday haze and get back to your desk...vacation is over...the new year brings rejuvenated hopes for the beginning of the end....MORTGAGES TO THE RESCUE!!!
The speculation that has slanted our outlook towards a long term float bias is no longer a hopeful anticipation...the political pledge to provide government funding in now a reality. 2008 was crappy...no other way to describe it. Hank and Ben managed to provide an economic crutch by "making it rain" money (quantitative easing), but are however still searching for an effective means of slowing the economic slowing. The next line of attack: go for the heart of the problem...asset devaluation...specifically real estate. Real Estate professionals of all kinds...bankers, brokers, agents, attorneys, appraisers, etc, etc....remember all that blame that has been placed on us over the past 18 months...here is our chance to EXORCIIIISE THE DEMONS!!!!!!
The Fed began its supportive buying in the Golds....Freddie Mac 4.0s to be more specific. Logic tells us that early in the program the Fed will only offer up a few billion a day at most (remember there is $500bn)Why??? Perhaps in hopes that MBS market participants will jump on the buying bandwagon and push rates down on their own...and then the Fed can provide STABILITY by steadily purchasing when supply outnumbers demand. Stability is all that we ask for at this point (well stable rates in the low 4.0 range that is).
Moving down the supply chain to lenders and even further to originators...a general bid steadiness will assist in the MBS pricing/rate sheet spread tightening process. The "less anxious" lender pricing strategies should provide the MBS market the supply of coupons they have been requesting. In plain English we expect rates to get better!
Here is a snap shot of the coupon stack. It's a down in coupon kinda day....
FN 4.0: +0-16+ at 99-28
FN 4.5: +0-11+ at 101-12
FN 5.0: +0-12+ at 102-10
FN 5.5: +0-10 at 102-24
FN 6.0: +0-02+ at 103-10
FYI the Fed will publish its buying activity every Thursday at 1630pm EST in the H.4.1 statistical release. You can access this report by clicking on this LINK