Perhaps it's due to yesterday's sell off, or perhaps there is support from weak economic data, but even in the face of dismal inflation data, MBS are holding steady on the day.
the 5.5% coupon is actually trading up right now by 6/32nds. This is truly amazing considering we've received some of the worst inflation numbers in over 20 years. The core Producer Price Index came in at .4%, double the expectation of 2%. This should have destroyed rates this morning, but it hasn't. There are a couple mitigating factors.
The economy is obviously weakening hourly with more companies releasing bad earnings, a weak consumer, and a weak housing market.
Combine this with the somewhat exuberant and emotional sell-off yesterday and MBSs have a weapon with which to fight inflation today. Unfortunately, the inflation news is not good for bonds in the long run, but it is encouraging to see them holding their ground despite such a forceful blow.
In breaking news, as this is being written (and before major news outlets will get you this info), Consumer Confidence Numbers were just released at a five year low! This should help mortgage rates for the rest of the morning.
Stay Tuned!