Yesterday, mortgage backed securities managed to have a mini rally and closed about .25 better in discount. This lead to many lenders repricing for the better, meaning lenders offered better mortgage rates later in the day when compared to the first rate sheet they sent out in the morning. So far this morning, we have given back a little of the gains we saw yesterday but we should see better rates sheets then what we got first thing yesterday morning. This will keep par 30 year fixed rate mortgages anywhere from 4.625% to 5% depending on the lender.
All economic reports for the day are out and here is the breakdown. First we got housing starts, economists where expecting 530,000 but the number came in much lower at 466,000 which is actually a record low number. I do see this as a positive since we have a glut of housing on the market now, less new homes being built should help to reduce the number of houses available for sale. Next, we got import prices, economists where expecting a -1.4% drop but the number was slightly better at -1.1%. So, the prices of imported products did not drop as much as expected. This is slightly negative for mortgage backed securities as higher prices might lead to inflation, which is the biggest enemy to low mortgage rates. Finally, we got the release of industrial production. Economists where expecting a -1.5% drop; however, the number came in worse at -1.8%. Industrial production measures economic activity and weaker economic activity is seen as a positive for mortgage backed securities.
Since the release of industrial production, mbs have moved higher and are currently at the same levels we closed at yesterday. As mbs move higher, mortgage rates move lower. Later today the minutes from the last fed meeting will be releases, but I suspect that will have no impact on mbs today. If any big movements happen I will get back to you.