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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....

Despite a rally in equity markets, prices of mortgage-backed securities moved higher yesterday. No economic data was released, trading volume was very thin, however MBS closed at their highest level since early this summer which allowed some lenders to reissue rate sheets with lower consumer borrowing costs. For the last half of the summer and all of September, prices of MBS have been stuck in a range, yesterday was the first time they closed outside of that range (highest prices since May). We must remind that this occurred in a low volume environment. Also, with the third quarter coming to an end, it is expected that market participants will be adding AAA rated assets to their balance sheets, so we are not too excited about the extent to which this rally continues....YET. We will grow more optimistic if the recent breakout holds when the fourth quarter begins on October 1. ...