MBS Market Continues with Volatility

Our U.S. long term bond market is "hijacked" by global instability and continued geo-political concerns which will continue to provide fantastic support for mortgage rates and how they are priced on the open market.

Today is likely to see the Mortgage Backed Securities (MBS) market continue with volatility. Already MBS have opened and worsened, and started to bounce back for improvement.   Mortgage Bonds are trading near unchanged levels to slightly lower this morning, despite a decline in the Stock markets. Bonds have shown resilience given that today’s economic data was slanted to the positive side.

Weekly Initial Jobless Claims fell to their lowest level in four months while the final reading for Gross Domestic Product in the 4th quarter of 2013 showed that consumer spending had its biggest gain in three years.

If MBS continue to improve on the day, consumers may see slightly better rebate pricing tomorrow.  MBS would have to improve a lot to see an actual rate improvement.  However, if MBS start to sell off today, that's a sign that we likely see rates creep up slightly. Today I will be waiting for the results of the 7 year Treasury auction.  This is not normally a market mover, but yesterday's 5 year Treasury auction helped to propel MBS to improved pricing and improved rates.  If today's 7 year Treasury auction causes the same reaction, we could see continued MBS improvement.