Yesterday, mortgage backed securities after being down quite a bit in the morning, managed to move higher and close up on the day by a few ticks.  Most lenders repriced for the better by about .25 in discount.  So far this morning, mbs have been pressured lower by about .125 in discount mainly due to money flowing from fixed income(treasuries and mbs) and into equities(stock market).  In what I feel is some good news, treasuries after reaching a low yield of 2.86 yesterday, really sold off late in the afternoon and continued overnight and is currently at a yield of 3.01.  In light of a pretty large treasury sell off, mbs are holding up rather well.  If mbs pricing holds the present levels, we should see better rate sheets this morning than what we had at the start of the day yesterday.

We are getting quite a bit of data this morning.  First, we got the Mortgage Bankers’ Association purchase index.  This index measures applications at mortgage lenders and is a leading indicator for home sales and construction.  This index fell 5.6% from last months reading signaling further troubles in the housing market.  Next, we got a couple reports on jobs.  The big report of the month comes Friday when we get the official government numbers on employment, but today we got 2 private sector reports.  First, we got the Challenger Job-Cut report.  This monthly report counts the number of layoffs announced by companies but it isn’t considered to be a market mover.  Last month this report showed 241,749 announced layoffs and this month there was only 186,350.   We also got the ADP Employment report, which is similar to the official jobs report we get Friday, but this report does not take into account government jobs and historically has varied greatly from the official numbers. The ADP numbers shows that last month we lost 697,000 jobs and it is pointing to a very poor report on Friday.   In about an hour, we get the release of the ISM Non manufacturing Index which is expected to come in at 41.0.  A lower number would be positive for mbs.  Lastly, later today we get the Fed Beige Book, which is a report on economic conditions which is used at the FOMC meetings where the fed sets interest rate policy.  The data is this report has already been released but it gives investors insight to what the Fed might do at the upcoming meeting.

At 10am eastern time, Secretary of Treasury Tim Geithner, will be testifying in front of the Senate Finance Committee on the 2010 budget introduced by President Obama.  As always, investors will be listening to every word he has to say and his comments and answers to questions can and will have an effect on the markets.  We are still waiting details on the Homeowner Affordability and Stabilization plan introduced by President Obama.  We are getting some information on this plan to assist responsible homeowners to refinance into lower interest rates and to help struggling homeowners to stay in their home and prevent foreclosure but still no concrete details.  We need details, but so far from the most open administration in history, nothing!!!   We were told that today the guidelines for this program would be released, so we will patiently await and I will get back to you once we get something.  We need these details to see how effective this program will be, and if it appears that it will help many people to refinance that should result in investors moving down in coupon(buying lower coupon mbs) which will help to drive mortgage rates lower.

Just in, we got the release of the ISM Non-Manufacturing index and the consensus was for a reading of 41.0, but the reading came in slightly better at 41.6.  On the news there was no reaction.  Early reports from fellow mortgage professionals show lender rate sheets to be slightly better than the first rate sheet issued yesterday.  This will keep par 30 year conventional mortgages anywhere from 4.875% to 5.125% for Texas homeowners, since rates do vary from state to state.  If we do get some news on the housing plan, I will get back to you later today with an analysis.