The important headlines:

1.  Overall the Employment Situation Report was weaker than expected with a decrease in non-farm payrolls of 17,000 compared to an anticipated gain of 58,000.  This is a sign of a contracting economy, which is generally good for mortgage rates.

2. ISM Stronger than expected.  The Institute for Supply Management index came in at 50.7 higher than expectations of 47.0.  This is an indication that the manufacturing sector is expanding slightly, and is normally bad news for mortgage rates.  However, this data will not have a major impact on today's bond trading.

3. Construction Spending Weaker.  Offsetting some of the growth indication from the ISM was the construction spending coming in at a 1.1% decrease, weaker than an already conservative estimate of -.5%.  This will not have a major impact on trading today, but weakness here is generally good news for bonds.

4. Consumer Sentiment Edges Down Slightly.  This index, derived from a survey of consumers, came in with a reading of 78.4, slightly lower than expectations of 79.0.  This is good news for mortgage rates as we've already discussed a weaker consumer spends less, which is bad for economic growth, which in turn is usually good for Mortgage Backed Securities (MBS).

5. Large Banks Discussing Bailout of Bond Insurers.  Though not an economic data release, this is very important news today and is the main factor that is preventing mortgage rates from going lower more rapidly.  If these bond insurers are stable, the economy can grow more steadily, and a steadily growing economy is generally bad for mortgage rates.

Analysis:

The ISM numbers were a bit of a surprise, especially in comparison to Consumer Sentiment.  We had already discussed that consumer sentiment should be weakening in this market.  So why are manufacturers expanding?  Keep in mind that a 50.0 reading would be neutral (no growth).  So the 50.7 isn't remarkably strong.  It could be a case that estimates were slightly too low.  Also, we have to consider that a weak dollar and low interest rates can lead to an immense amount of manufacturing for exports.  

The employment data should really help rates, and it indicates another move towards recession.  Consumer sentiment coming in weaker than an already low estimate should also help, and is good support for some of the assertions I've made in the previous weeks. 

But the Wall Street take is that the data is HEAVILY mixed today with certain aspects indicating strength, and others, weakness.  So stocks are volatile this morning and currently off their highs falling into negative territory just now.

The best news for you is that MBSs are doing better this morning, not as much as I would like, but still doing very well.  The price on the 5.5% coupon is up 11/32nds, and the price on a 5.0% coupon is up 14/32nds.  Remember that increasing prices correlate exactly to decreasing rates.  So a given mortgage rate today could cost as much as .375% to obtain, assuming these numbers stay steady (or get better).

 Stay tuned for updates, but expect to see some slightly better rates today.