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Its 430 on a Friday afternoon. The market is resting after a week's worth of grinding to the right. (Note sarcasm.) It was exciting when the week began...but it sure did fizzle out into the close. Everything we watch turned a profit this week. We hope you followed the crowd and booked a few extra bps yourself. Gobble Gobble. I can smell the mashed potatoes.... Enjoy the weekend PS. Smash someone up Tucker. go 44

With absolutely no exaggeration, all but one, maybe two of the times I've looked at my screens before writing this week MBS have been between -2 and +2 ticks on the day while changes in tsy's have been more pronounced. Same story today, at least on a price level, as 4.5's are up 2 ticks to 101-23 whereas 10's are down 6 ticks, bringing the yield up to 3.362. Neither of those levels are especially interesting as they both lie above levels that have supported 99% of the trade this week. For MBS, the level is obviously 101-21, which has received more than its fair share of mention this week, and likely needs no further introduction. And though we haven't seen much of it this week, the 3.38 lvl in tsys is equally significant. It just draws more of it's credibility from weeks past. I pointed out a "careful!" in the chart above as tsy's flirt with breaking a downtrend in yields. But the white circle on the volume forest also shows that volume picked up in response to the better buying opportunity, and on a Friday afternoon, that says a bit more than normal about the range. So at the risk of being too firm, I'm callin' it... 3.38 won't be broken with volume for the rest of the day. MBS won't break below 101-21 with volume either. That means lenders that haven't repriced yet, probably won't... 10 yr tsy futures aren't providing nearly the same level of clarity however... We'll get to a more robust discussion of this...

While our benchmarks have bounced around this six basis point range all week..." rate sheet influential" MBS coupon price improvements have stalled and gone sideways as the MBS spread tightener (MBS outperformance of TSYs) we enjoyed over the past two weeks finally lost momentum. Sure, benchmark rates COULD move lower, but MBS prices are topped out and yield spreads are too rich to see lenders giving back much more rate sheet rebate. Lock 'em if you got 'em....

While benchmark interest rates continue to chop around in a contained range, mortgage-backed securities have moved sideways, failing to make much progress in either direction. Although we have experience a few moments of added volatility, tight trading ranges have kept and generally "topped out" MBS prices have kept mortgage rates stable all week, near six month lows. As previously stated, MBS prices are hitting a ceiling, unable to make enough progress to push mortgage rates any lower. Therefore, if you are still floating, it is time to take advantage of the aggressive rates lenders are currently offering. Eventhough there is room for benchmark Treasury yields to move lower heading into year end, we do not expect MBS prices to benefit from continued gains as the recent strong performance of mortgages has many investors thinking about profit taking....

Jumbo program; more on short sales; news from Chase, SunTrust, DR Horton, GMAC; rates quiet...

The FN 4.0 is currently -0-02 at 99-08 and the FN 4.5 is trading +0-01 at 101-23. The range narrows...there isnt much room for further price appreciation in "rate sheet influential" MBS coupons. Mortgage rates will either go sideways or move higher. Lock....

In line with weak global markets, US equities are looking to open lower this morning. Two hours before the bell sounds S&P 500 futures are down 8.2 points at 1,086 and the Dow is off 68 points to 10,259. Following the trend, commodity prices are also weaker. WTI Crude oil is trading 52 cents lower at $77.53 per barrel and Spot Gold is down $4.95 to $1139.65. ...

Earlier in the day we discussed movement in MBS prices that brought 4.5's to their lowest levels of the session, but we mentioned some support for MBS as well as some support for tsy yields that had been weakening at the same time. By closing time, those ranges identified much earlier in the day held up, carrying us into tomorrow, a data-free options expirations Friday with little to no suggestion for directionality. Turns out that 101-21 was a pretty solid area for 4.5 support. And in 10's, despite a couple exploratory movements toward 3.36, 10's finished in better territory vs. their support. Volume was evenly distributed and nothing to write home about as we were mostly on par with yesterday's levels. To reiterate the sense of uncertainty going into tomorrow, today did nothing to alter the course of the longer term trends. Sorry about leaving the uptrend out of MBS... It's not that it doesn't exist, just that it didn't come into play today. With the collision of tsy yields to both the horizontal resistance at 3.31 and the trend of gradually higher lows, we should get a read on which of the two matter more over the next few days. If yields move higher tomorrow, MOVEMENT of yield gets the nod, but relatively unchanged and up to 3bps lower and 3.31 would ssteal some significance from other technical stops. In fact, we're pretty inclined to lean toward 3.31 being a touch layer of resistance in lieu of some game changing data. Reason? It coincides...

The Fed's weekly net MBS purchases totaled $16.00 billion, $2.5 more than the previous, holiday shortened week. The majority of Fed purchases were in 4.5 and 5.0 MBS coupons this week. These are called "production" or "current " coupons and represent loan supply being sold in the secondary mortgage market by loan originators. The Fed's purchases of production MBS coupons picked up this week because MBS prices tested record high levels which pushed mortgage rates to six month lows. Lower mortgage rates brought out more loan supply...and the Fed was there to provide liquidity for lenders. ...

The Mortgage Bankers Association reported that delinquency rates during the third quarter hit all time highs. Prime mortgages and FHA mortgages appear to be driving the increases while subprime loans problems may be leveling off....

Heading into the close, the FN 4.0 is trading +0-02 at 99-09 yielding 4.078% and the FN 4.5 is +0-02 at 101-24 yielding 4.286%. The secondary market current coupon (CC) is 4.13%. The CC is +78/10yr TSY and +67/10yr swap. As you can see in the chart below, after prices fell early in the week, "rate sheet influential" MBS prices haven't made much progress in either direction with most of the price action occurring between 101-26 and 101-20. This should continue into today's close. Again...lock!

This is one of those obligatory alerts where price action in context doesn't justify an alert, but MBS prices have touched their lows of the day. In addition tsy's have broken out of their trend of improvement on the day with the 10yr backing up 3.35. Will there be reprices? Tough to say, considering the nice, flat resistance going back to yesterday at 11am. That coincides with some internal support at just over 3.35 in tsys. So personally, I wouldn't be rushing to lock anything that wasn't locked already. However, given the lock bias of the hedge ratio, that might constitute a different swath of your pipeline... If you can risk it, roll with it and wait to see if 3.35 tsy's break or 101-21 MBS breaks. Some lenders will reprice for the worse, but many will not (not unless we move lower that is... and we'll let you know if that happens).

On Obama administration summit on strengthening credit flows to small businesses, Geithner said “We need banks to be working with us, not against recovery." At the very same time on Wednesday, an amendment from Reps. Brad Miller and Dennis Moore would allow the FDIC to impose a 20 percent haircut on all secured creditors, including the 12 Home Loan banks, when resolving systemically important institutions that fail....

Almost all short and long term mortgage interest rates fell during the most recent week with the 15-year FRM reported by Freddie Mac hitting an all-time low. Only Fannie's short term ARM increased during the week. ...

Reports from fellow mortgage professionals indicate that mortgage rates are unchanged from yesterday. The par 30 year conventional rate mortgage remains in the 4.625% to 4.875% range for well qualified consumers. To secure the par interest rate you must have a FICO credit score of 740 or higher, a loan to value at 80% or less and pay all closing costs including an estimated one point loan origination/discount/broker fee. If you are seeking a 15 year term, you should expect a par rate in the 4.125% to 4.375% range with similar costs. Mortgage rates are testing the lower boundaries of their range. Given the currently expensive prices of MBS, we don't see much room left for mortgage rates to rally. Still in lock mode. ...