Yesterday, mortgage backed securities managed to claw there way from the lows of the day to only close down a couple ticks from where they closed on Friday. So far this morning, mbs have opened lower and early reports from fellow mortgage professionals show rates to be about .125% higher today. We should see par 30 year conventional mortgages anywhere from 4.875% to 5.125% depending on the lender, your state, your credit score, your property type, and your loan to value.
There are no economic reports of interest being released today but we do have a couple significant events taking place. First, Federal Reserve Chairman Ben Bernanke spoke to the Council on Foreign Relations this morning. Any time Ben Bernanke speaks, investors are listening to every word as his statements and answers to questions can move the markets. I listened to his speech this morning and nothing was said that would cause the markets to move in a big way. Secondly, we do have another Treasury auction later today. This time it is a record 3 year Treasury Note auction of $34billion. The added supply will put pressure on treasuries to move lower in price which we saw overnight with Treasuries selling off and driving the yield higher. This is the law of supply and demand. With more supply of Treasuries available for sale, it drives the price lower which increases the yield or rate of return to the investor. With a huge supply available, you have to attract investors by paying a higher yield.
As I have been typing this update, the stock market has opened and appears to be in rally mode. Currently the dow is up 220 points which is going to make it difficult for mbs to move higher which results in lower rates. A couple positives though would be that mbs are only down 4 ticks while the stock market is up over 200 and the yields on treasuries are moving much higher. Yesterday, the yield on the 10 year treasury closed at 2.85 and currently it is trading at a yield of 2.95 so it is a positive to see mbs holding up so well in the face of a big stock market rally and a treasury sell off. Tomorrow, we get another treasury auction but this time it will be the 10 year treasury note being offered, so we have more supply hitting us tomorrow which will continue to make it difficult for mbs to improve. If the stock market continues to move higher, I would expect more losses to mbs pricing; however, if the stock market rally fizzles, mbs and treasuries should benefit.
I will get back to you later today with an update