Yesterday mortgage backed securities (MBS) had a strong rally leading to many lenders repricing for the better early in the afternoon, however a late day sell off forced lenders to reconsider their decision to pass along lower borrowing costs. After the first reprice for the better consumer borrowing costs decreased by .125 in discount with several lenders offering 4.5% par rates for well qualified borrowers.  Only a few lenders repriced for the worse late in the afternoon.

What's Moving Money Today...

This morning the Labor Department released the weekly jobless claims report.  The report showed jobless claims had decreased 20,000 from the prior week to 654,000 people filing for unemployment insurance which was slightly better than economist’s predictions.  Continuing claims set a new record high with 5.84 million Americans continuing to file for unemployment insurance which indicates the labor market will remain a big concern for financial policymakers.  The jobs outlook continues to look very weak which should help to keep wage based inflation in check. 

The US International Trade numbers were also released this morning showing that our trade gap had decreased.  Economists were expecting this report to show that our country had a trade deficit of -$36.5billion, meaning our imports outnumbered our exports by $36.5billion.  The actual number came in considerably better as the trade gap narrowed to -$26.0billion which is the lowest reading in over 9 years.  No reaction after the release.

Import/Export prices were also released this morning which gives investors another chance to check out inflation.  The report indicated that prices of imported products increased 0.5% month over month, which is more than the expectations of a -0.2% drop.   The more important information in the month over month report is import prices excluding oil.  This showed import prices to have fallen for the third month in a row by 0.7%.  This implies inflation is not a concern which was supported by the FOMC minutes from the last fed meeting...the FOMC stated that inflation over the near term is very unlikely.  Year over year prices though declined more than expectations of -12.8% to a decline of -14.9%.  Export prices showed a bigger decline than expected to a month over month drop of -0.6% and year over year drop of -6.7%.   No reaction after the release.

Today at 1pm eastern, we are getting another round of 10 year treasury notes up for auction.  With the added supply of debt on the market, it may apply pressure on treasuries and MBS to move lower in price.  As MBS move lower in price mortgage rates move higher.   We had a record amount of 3 year treasuries available yesterday for auction which had strong demand, especially from foreign investors.  This helped to keep the rally in MBS going throughout the day yesterday.

In some related news, Wells Fargo is reporting this morning that they will have record profits in the first quarter.   It appears this news is creating a lot of optimism in the stock market which is currently up over 100 points.  Strength in the stock market could apply pressure on MBS to move lower as investors want to sell low yielding fixed income investments and move the money over to higher yielding stocks.  So far MBS are holding steady but they are down a little bit on the day.   The MBS market closes early today at 2pm eastern and will be closed tomorrow in celebration of Good Friday and Easter weekend.   

I receive a lot of emails and comments from readers asking whether they should lock or hope for rates to move lower and wait.  This morning, well qualified consumers should be able to get a 30 year fixed at 4.5% with 1 origination point.  If you are waiting on the sidelines hoping rates move lower, I would suggest getting off the fence as mortgage rates are still at record lows.  

Over the last few months, we have seen rates move to 4.5% but not much lower, unless you wished to pay higher fees.  Each time we hit these levels, rates start to move higher.  We say quite often to lock the lows and float the highs.  Well, rates have been moving in a range from 4.875 %(the highs) to 4.5%(the lows), so we are once again at the lows.  Now would be a great time to lock in and move on with your life and be glad that you secured a fantastic interest rate. 

Early reports from fellow mortgage professionals are indicating that well qualified borrowers can still lock a 30 year conventional mortgage close to 4.5%.  To qualify, you must have credit scores over 740, fully document your income, and pay all closing costs associated with loan including 1 point.  Can rates move lower, perhaps, but history implies that rates are near the lowest levels that lenders have been willing to offer.  The better question is: Can rates move higher, DEFINITELY.   At this point, there is much more room for rates to move higher compared to the room for rates to move lower. 

As always, for intraday updates check out the MBS Commentary Blog.