Good Morning MBS World...buyers are moving "down in coupon" this morning. Rate sheets are improved.

FN30_________________________                GN30______________________

FN 4.5 -------->>>> +0-06 to  100-24                   GN 4.5 -------->>>> +0-09 to  101-00

FN 5.0 -------->>>> +0-05  to  101-24                  GN 5.0 -------->>>> +0-05 to  102-00

FN 5.5 -------->>>> +0-02  to  102-11                  GN 5.5 -------->>>> +0-04 to  102-18

FN 6.0 -------->>>> +0-02  to  103-01                  GN 6.0 -------->>>> +0-03  to  103-01

Stocks are down and TSY prices are up with the long end of the curve leading the way.

Yesterday fixed income markets received some sobering news when the Treasury Department announced the quarterly refunding would total $67bn. The looming excess supply of debt pushed longer term TSY yields even higher,  mortgages however did not follow suit as cheaper MBS prices again welcomed day trading bargain buyers. This "buying on cheapness" has served to slow  your rate sheet prices from moving even lower while the yield curve steepens.

This week trading activity has been more or less normal but that is of no thanks to market participants other than the Federal Reserve. Profit takers remain ever present, overseas buyers continue to be attracted to GN paper, and mortgage banker supply is still sluggish (that is due to the fact that no one is rushing to lock their loans...fyi originator lock activity did increase a bit yesterday).

The Obama administration's initial attack on the economic crisis at hand, a $800-$900bn Stimulus package, ran into its first major opposition yesterday. President Obama stated that the failure to pass the $800-$900bn Stimulus Package would be "catastrophe and guarantee a longer recession." Expect to hear increased  political rhetoric from Capitol Hill...not to mention a mind numbing amount of media analysis. FYI even though the Senate is democratically dominated they still don't have enough votes to pass the bill. I guess bipartisanship isn't "cool" if your teammates jump ship...

Economic Data

Jobless Claims Press Release: http://www.dol.gov/opa/media/press/eta/ui/current.htm

Consensus estimates for Jobless Claims was in the 580,000 range. It was worse than expected...SURPRISE!!!!

From the  Department of Labor...

"In the week ending Jan. 31, the advance figure for seasonally adjusted initial claims was 626,000, an increase of 35,000 from the previous week's revised figure of 591,000. The 4-week moving average was 582,250, an increase of 39,000 from the previous week's revised average of 543,250.

The advance seasonally adjusted insured unemployment rate was 3.6 percent for the week ending Jan. 24, unchanged from the prior week's unrevised rate of 3.6 percent.

The advance number for seasonally adjusted insured unemployment during the week ending Jan. 24 was 4,788,000, an increase of 20,000 from the preceding week's revised level of 4,768,000. The 4-week moving average was 4,672,000, an increase of 44,000 from the preceding week's revised average of 4,628,000.  

Productivity and Costs Press Release: http://www.bls.gov/news.release/prod2.toc.htm

Productivity is the output that a worker produces for each hour of work.  A productive work force is essential if the economy is to grow faster and faster. It is even more important when firms are laying off labor...the remaining workers are relied upon to perform additional tasks. Plus labor costs make up about 70% of business expenses so if a company is not using their labor force effectively they could be wasting a lot of money!!!

From the Bureau of Labor statistics...

"In the fourth quarter of 2008, productivity increased 3.1 percent in the business sector, with output and hours decreasing 5.2 percent and 8.1 percent, respectively.  Output per hour for the nonfarm business sector rose 3.2 percent as output declined 5.5 percent and hours fell 8.4 percent.  For the full year 2008 productivity rose 2.7 percent in the business sector and 2.8 percent in the nonfarm business sector."

MUCH BETTER THAN EXPECTED!!! Well in reality it is only because of the huge amounts of job losses and waning consumer demand. Unfortunately growing Jobless Claims trump any positives one can take from this data...

Fed MBS buying report at 3pm.

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