If you had decided to sleep the day away yesterday, you wouldn’t have missed much in the mortgage backed security world (MBS).  The entire day, MBS traded in a very tight range in  below normal volume.  That trend appears to be carrying over into today's session  which will allow lenders to keep mortgage rates in a stable range.

Not much on the economic data front to discuss today.  Already out this morning is the Mortgage Bankers’ Association Applications Index. This release of the data set confirmed recent statistics indicating the pace of activity in the housing market are still slowing.   The new homes purchases index declined 4.4% for the week of May 15^th . The refinance index, however, posted a 4.5% increase. 

Low housing prices and low mortgage rates are not enticing new buyers to market yet.   With the purchase applications index showing disappointing numbers, you would think this would be bad for stocks; however, the futures market is pointing to a positive open.  Less home purchases will lead to less buying of furniture, flooring, appliances, etc… which will continue to keep retail sales numbers down.  In related news, Home Depot reported a 9.7% drop in first quarter sales while Lowes posted better than expected numbers and gave an optimistic outlook.   Chief executive officer for Home Depot gave a less than optimistic outlook due to the rising amount of foreclosures especially on the west coast.  It is going to be difficult for our economy to grow until the housing sector starts to see some improvement and foreclosures show a steady decline.

Treasury Secretary Tim Geithner is currently sitting in front of the Senate Finance committee discussing the TARP program. So far his commentary has strayed from the scheduled TARP topic...including regulating the financial industry. The market is listening for any forward looking indications of government regulatory guiding principles.

At 2pm eastern the Federal Reserve will release the minutes from the last Federal Open Market Committee meeting.  Most of the information in these minutes will already be known but investors will read through them to gather any hint on future monetary policy and our economic outlook.  It is expected to show continued verbiage regarding inflation being in check for the time being.  Until the release of these minutes, barring any headline news item from Mr. Geithner, I suspect that MBS will hover around the same levels as yesterday’s close.   Once the minutes are released, the MBS Commentary blog will be all over it with a recap. 

The markets are looking for direction as the bulls are battling the bears putting more weight on optimistic reports and less on the pessimistic reports such as the purchase applications index we received this morning.   If our economy is on the path to recovery and growth, the stock market will continue to rise and it will be increasingly difficult for the Fed to keep mortgage rates down.  

Early reports from fellow mortgage professionals are indicating lenders rate sheets to be very similar to yesterday’s.  This will keep the par 30 year conventional rate mortgage in the 4.625% to 4.875% range for the best qualified consumers. 

Tomorrow, the economic data picks up with jobless claims, leading indicators, Philadelphia fed survey and treasury announcement of upcoming debt supply.