Yesterday was a bad day.  Mortgage backed securities lost ground and followed treasuries to higher yields.  We should see lenders rate sheets worse today by about .375 to .50 in discount.  So far this morning we are continuing the trend and are down slightly.  This should place lenders par 30 year fixed rate mortgage anywhere from 4.875 to 5.125%.

We did get some economic data that were both favorable to mbs.  First, we got weekly jobless claims.  Economists where expecting 625,000 people to file claims last week; however, the number came in much higher at 667,000.  Worse yet is the continuing claims which set a new record high of 5.112 million Americans continuing to file jobless claims.  So, the labor outlook is still looking very grim which will keep an economic recovery from happening anytime soon.  We also got durable orders which is a measure of new orders placed by manufacturers for equipment that is expected to last several years such as autos, large appliances, computers, etc….  If companies are increasing orders for large items that is a positive signal of future economic growth and activity which might lead to inflation.   Economists where expecting a drop of -2.5%; however, the actual reading came in much worse at a drop of -5.2%.  Apparently businesses are not ready to start investing in large items which signals that an economic recovery is still off in the distance.  This is mbs positive and on the news we managed to improve slightly. 

For the rest of the day, mbs will continue to stay under pressure.  Treasuries continue to sell off due to investor’s belief that with all the new government spending on its way, there will be much more treasuries issued to fund the spending.  Even though President Obama vowed to get rid of ear marks, a bill just passed by the House of Representatives has over 9,000 ear marks totaling $12 billion dollars in spending.  Chuck Schumer says that American’s don’t really care about these “Porky little amendments”, but I am 1 American that does.  By the way, 40% of these ear marks where requested by Republicans, so it is not just the Democrats.  Now, off my soap box since this is a mortgage blog and not a political blog.

Mortgage rates constantly move in a sideways S pattern.  They move higher, top out, then move lower until it reaches a bottom, then repeats…..  Right now, we are on the up slope and in my opinion we should not move much higher then present levels.   The markets continues to be detached from everything.  After the 2 economic reports released today, you would think that the stock market would sell off and fixed income(treasury and mbs) would benefit.  So far this morning the stock market is up 60 points and treasuries and mbs are unchanged from yesterdays close.  There are so many moving parts that go into what determines interest rates and new parts are being added all the time.  If you can lock a rate under 5%, I would suggest that you take it.