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The type of positive economic headlines seen yesterday would normally lead to lower bond prices and higher mortgage rates, but that turned out to be far from the case. And though MBS initially moved lower, that trend soon reversed and we saw the best day of gains all month as the internal components of the economic reports were not as strong as the headlines suggested. ...

Mortgage rates are inching lower as prices of mortgage backed securities continue to move higher today. To remind readers, mortgage rates are set by the trading of mortgage backed securities. As MBS prices increase lenders are able to offer lower mortgage rates. Contributing to move lower in rates this morning is strength in bonds (like MBS) as stock markets sell off. This weakness began overnight in Asia and Europe and carried over into US trading. Already this morning, investor demand for safer securities is helping MBS post healthy gains. ...