Mortgage Rates See Bounce with Movement of MBS

Mortgage Backed Securities (MBS) were enjoying a nice bounce off of our floor of support that we identified yesterday, even before the first dose of economic data hit today.  The weaker than expected data helped MBS improve further...but look out.  Anything can happen in this market.  We are testing new levels in resistance.  It is at this point where traders begin to get concern about future upside.  

Today we saw Retail Sales were weaker than expected.   Even when you strip out Autos, it was flat at 0.0% vs estimate of 0.1%. This weaker economic data has helped MBS but not by much. This report is clearly being discounted by traders due to the impact our terrible weather has had on our economy.  (Sounds familiar?) This reports is the top of the food pyramid and trickles down into every facet of our economy.

Initial Weekly Jobless Claims were higher than expectations, but it was not a huge miss.  The more closely watched 4 week moving average increased slightly to 336,750. This is another positive for bond prices but once again, these results are being discounted to some measure due to the weather. Continuing Claims decreased again but that is largely due to long term unemployment benefits running out.

Business Inventories missed their mark by a little bit this morning as well as it came in below expectations.  This news is neither positive or negative MBS has been at a steady level since this morning earlier news.

30 Year Treasury Bond Auction will be released at 1:00EST. We saw a slight pull back in demand on the 10 year note auction yesterday. If we get a similar pull back on this auction, we could see our rally lose some steam.

Mortgage Backed Securities (MBS) are likely to display volatility as the weather wreaks havoc on the Northeast, including Wall Street.  This morning's gains are partially attributed to weaker than expected economic reports.  After two full days of MBS worsening we may be seeing a bit of a bounce.  My recommendation today is cautiously float – but have your hand on the trigger if rates begin to worsen.

If you have any questions in regards to your financing needs, please give me a call at 314-744-7806, or visit my website at www.CallTheMoneyMan.com.