Yesterday, mortgage backed securities basically closed where they opened and it appears that trend will continue today. Also, yesterday we got the release of existing home sales. Economists were expecting an annual pace of 4.45m but the number came in much better at 4.74m. The inventory of homes available dropped from an 11.2 months supply to 9.3 months; however the median price showed a year over year decline of 15%. The leading indicators report also came in better. A drop in the supply of homes for sale is good news and hopefully this trend will continue as there is a glut of homes for sale and it will be very difficult for housing prices to bottom out with a large inventory still available.
Just hitting the wires is the only economic report to be released today, consumer confidence. Economist’s are expecting this number to come in at 38.0 after last months 38.0 reading. The actual number came in at 37.7 a new record low. A reading of 100 is average, so numbers below that are considered bad for the economy and this reading continues to show that the consumer is not very confident with our economy. Less consumer confidence leads to less consumer spending which is bad for the economy and generally a positive for mortgage backed securities and other fixed income investments. Later today we do get a treasury auction of 2 yr notes. The added supply of treasuries could be a negative for mbs. With more treasuries available, that might cause the price to drop which increases the yield they pay making them more attractive to investors when compared to mbs.
If we start to get a big sell off which will lead to higher mortgage rates, I will get back to you. From early reports, lenders rate sheets are relatively unchanged from yesterday.