Don't be surprised to see quite a big swing in day over day interest rates when lenders release sheets this morning.  Many of them didn't make it into the market as far as passing on the improvements in MBS pricing.  Some that did, didn't pass down the full change in MBS prices to rate sheets.  But with prices improving yet again this morning, we should have a bigger portion of those baked into the cake today.

If you didn't catch it yesterday: introducing a new feature that many of you have asked for (don't worry, it will be updated to be prettier and more thorough as we progress):

Current MBS quotes!  Remember that 2nd two numbers in the price are the "bid" and the "ask."  We used bid/ask instead of reporting the last trade because it's more accurate with respect to up to the minute bond conditions.  Yes it's slightly more complicated, but it's ultimately superior to other sites that just give you one price.  After all, what price are you looking at?  Is that the figure of the last MBS trade?  Is it the current asking price?  the current bid price?  Either way, the last trade means nothing if the next bid is 4/32nds lower.  Anyway, here you go:

 chart as of 6:01 AM PDT

As far as economic data, the only scheduled release was MBA mortgage applications which fell 1.9%.  This includes both refinances and purchases.  Taking a look at just the purchase activity, we see a rise in 1.6%, month over month, which is over a 10% decrease year over year.  Chalk up the bad refinance numbers to the higher rates in February (compared to January).

Seeing as how it is a light news day which follows a landmark announcement, traders will continue to sit around the campfire and ask each other how they feel about the 200 billion dollar check that Uncle Ben said he'd trade them for some of their mortgage paper.  They were pretty stoked about it yesterday including the rest of the economy apparently.  But DOW futures have flattened out over night, so we'll have to see which way the boldest lemming starts moving today!

If you didn't catch yesterday's news, the Fed announced a Term Securities Lending Facility to make 200 bil available in liquidity.  What it amounts to is the Fed allowing MBS holders to buy treasuries with their MBS holdings.  This does not mean that Fannie and Freddie are turning into Ginnie, but they are certainly shopping at the same stores.

It will be interesting to see how this stop-gap plays out.  The hope is that, putting a band-aid on liquidity and quality problems in the MBS market will stimulate enough loan activity to ameliorate the housing and mortgage component of the current recession (yeah I said it).  But until quality is proven and/or realized on a broader level, the liquidity cannot return of it's own accord.  And if Fannie and Freddie go out and blow their allowance on more bad mortgages, Uncle Ben might not be so generous next time.

So far today looks good to float short to mid term.  I'll be back with some analysis on trends later in the day.  Stay tuned for updates as it's a limited data day.  That can make for a volatile day as the lemmings tend to get spooked by any unexpected news these days and start heading for the cliffs.  Be ready to lock, as always, but we'll certainly be floating this morning.