BREAKING NEWS: The Treasury Department announced that  under the Home Affordable Modification Program, it will automatically refinance the second mortgages of borrowers receiving first mortgage modifications (where applicable). More to come....

After trading higher while markets were distracted yesterday, MBS prices are returning to earth for a taste of reality today....

Since 5pm "Going Out" Marks...

FN30___________________________________

FN 4.0 -------->>>> +0-02  to  100-19  from 100-17

FN 4.5 -------->>>> +0-02  to 102-06  from 102-04

FN 5.0 -------->>>> +0-01  to 103-07  from 103-06

FN 5.5 -------->>>> +0-00  to 103-27  from 103-27

FN 6.0 -------->>>> +0-01  to 104-22  from 104-21

GN30___________________________________ 

GN 4.0 -------->>>> +0-01  to 100-20  from 100-19

GN 4.5 -------->>>> +0-02  to 102-14  from 102-12

GN 5.0 -------->>>> +0-00  to 103-25  from 103-25

GN 5.5 -------->>>> +0-00  to 104-03  from 104-03

GN 6.0 -------->>>> +0-01  to 104-15  from 104-14

The MBS stack moved higher at the open but sold off in the 11AM hour. MBS prices are attempting to recover from their 11AM consolidation, however sluggish and sideways TSY trading (does not bode well for 5 yr auction at 1 pm) is preventing mortgages from continuing on their recent run up of higher prices and tighter spreads......

Nonetheless, MBS prices are near all time highs...which excites primary mortgage market participants looking for lower rates and higher YSP. It is however important to remind all that we have been in this position before...and the gains never materialized  in rate sheets.

Although lenders have been busy ramping up support staff and implementing new training processes...the behavior of primary/secondary spreads would indicate that lenders are still unwilling to "open the flood  gates".  We are hesitant to say this "opening of the flood gates" will occur before the end of the second quarter...if at all. But, then again, the Fed has enough MBS funding to continue purchasing MBS until the end of the year...so perhaps a 3.5 coupon will be seen actively trading in the months to come. (Doesnt mean mortgage rates will be 3.5%).

In regards to the FOMC meeting...there is some chatter making its way around the market that the Fed will announce increased funding support for TSY purchases. This would be an MBS supportive event and might even put some pressure on lenders, who are moderating application flows by adjusting rate sheets for the worse, to pass through better mortgage rates to borrowers.   Either way, mortgage rates are still at all time lows and this is purely explorative speculation...all we can do is continue to monitor  rate sheets for tighter primary/secondary spreads, listen out for shorter turn times, and hope the unemployment line doesnt effect mortgage pipeline fallout.

The Treasury will auction a record $35bn 5 yr Treasury notes at 1pm. Given yesterday's flight to quality rally in TSYs and today's sluggish trading environment...this auction may not see the demand that the Treasury Department was hoping for...stay alert for REPRICE FOR THE WORSE ALERT

PS...Yes I know that the BREAKING NEWS is really NO NEWS for loan officers...but you should still be aware of the details. More to come....