Yesterday, mortgage backed securities managed to improve slightly on the day.  We should see the same rate sheets today that we had yesterday.  This will continue to put par interest rates anywhere from 4.625% to 5%, depending on the lender. 

Today we did get the release of 3 economic reports.  First, we got the weekly jobless numbers.  Economists where expecting 610,000 claims to be filed in the last week; however, the number came in higher at 623,000 claims.  The 4 week average moved higher to 607,500 which is the highest level seen since 1982 and the continuing claims moved to an all time high of 4.81 million.  So, the jobs numbers continue to be very poor.  Higher jobless numbers are generally seen as a positive for mortgage backed securities.  Next we got the release of retail sales and to everyone’s surprise they came in much higher then expected.  First, the overall numbers where expected to show a month over month decline of -0.3% but the number came in at a 1.0% increase!  When excluding autos from the numbers, we still had an increase of 0.9% when economists where expecting a decline of -0.4%.  Usually, with such a big miss to the plus side on retail sales, you would see the stock market move higher and the fixed income market(mbs and treasuries) move lower.  Not the case this morning.  Since the release of the numbers, stock futures have moved considerably lower and mbs have inched a little higher.  As mbs move higher in price, mortgage rates move lower in rate.

It seems that investors are not too excited about the spending/stimulus bill and with the lack of any details of President Obama’s bank rescue plan it seems that investors will continue to seek the safety of mortgage backed securities and treasuries.  This is known as a flight to quality or a flight to safety.  One item of concern for later today is another treasury auction, but this time it is the 30 yr Treasury bond.  The 10yr treasury note auction yesterday went pretty well with a lot of foreign participation.  It is a good sign to see high foreign demand for our US treasuries and hopefully the auction today at 1pm eastern is received as well as the one yesterday. 

Early reports from fellow mortgage professionals are showing lenders rate sheets slightly better this morning by about .2 in discount.  I will get back to you if we start to see a sell off which could lead to lenders repricing for the worse.