by Matthew Graham

It could have been worse...  At least the headline didn't read: "no love to start the month of love."  Another day come and gone with that recently unfamiliar green color on the screen denoting moderately improved MBS pricing on the day.  

Though green is good, treasuries were the stars today with the 10 year up over a point bringing the yield back down to 2.72.  Chalk as much of this as you must to flight-to-safety buying on the heels of weak economic data mentioned earlier, but there are other forces at play as well.  For example, with the recent sell-off, short covering came into play today, as well as the nominal effects of "preparation" as treasury supply will be limited (relatively) until next week, the exception being a "4 weeker" coming tomorrow at 1pm."  Concomitant with the negative data, stocks sold a bit, though recovered some of the losses by day's end at -60.  All in all, a fairly boring day by the numbers.

So perhaps an interesting headline or two?

Many an outspoken lamenter was happy to see bloomberg report today that the Obama Administration would increase measures to ensure recipients of governments funds would use them for intended purposes.  In other words,"If we give you money to do more loans, do more loans."  After all the balance sheet bolstering backlash of previous tarp distributions, this was no doubt a welcome announcement despite our burgeoning socialism. Would this be good for MBS and mortgage rates?  Difficult to say at this point, but many of us certainly thought the opposite eventuality was, at the very least, not helping.  So we'll see. 

Dallas Fed Fisher was out today and mentioned inflation, and no one seemed to mind.  Oh, how times have changed.  The Senate began work on the stimulus bill freshly passed by the house, adding to the "bill" (pun intended) a bit, by way of "helping out" middle and upper middle income families from getting hit with the AMT (alternative minimum tax).  Not sure if you know what the income level is for that bad boy, but I'm not sure if that 64 billion increase in the bill is going to the most effective place considering republicans maintaining the first fix should come for the housing market. 

The other major news items today were the possible re-appearance of a 7yr treasury bill, and the release of the Federal Reserves January Senior Loan Officer Survey.  I'd like to write in a little more detail on both of these and should be able to hook you up with that either later tonight or tomorrow.

Speaking of tomorrow, another light day.  Of course, there's the aforementioned 4 week tsy auction at 1pm, not normally a big mover, but it seems all eyes are on all tsy auctions these days.  If today is an indication, demand expectations may have picked up a but.  Other than the normal tuesday news that no one cares about like redbook and store sales, we'll get pending home sales at 10AM which will give us a potential early clue as to the extent rate drops might be helping demand.  But despite the sparse calendar, headlines should be abundant, so be ready for anything.  We'll keep you posted as it's happening tomorrow.