FN30_________________________                GN30______________________

FN 4.5 -------->>>> -0-01 to  100-18                   GN 4.5 -------->>>> -0-03 to  100-24

FN 5.0 -------->>>> +0-01  to  101-22                 GN 5.0 -------->>>> +0-00 to  101-28

FN 5.5 -------->>>> +0-00  to  102-07                 GN 5.5 -------->>>> +0-00 to  102-13

FN 6.0 -------->>>> +0-00  to  102-31                 GN 6.0 -------->>>> -0-02  to  102-28

Washington DC will once again become the capital of the financial world this week. After the House passed Barack Obama's $819,000,000,000 fiscal stimulus package on January 29, the Senate failed to find a majority vote on the pork filled financial stimulus package last week. Over the next five days we will be subjected to repeated rhetorical renditions of Wall Street "what ifs" and further expected economic expenditures in the event a consensus is not met on Capitol Hill.

Last week fixed income markets backed up as spread traders (borrow money and invest it...make more than your cost of funds and you win) priced in this week's quarterly refunding (TSY auctions) and the unknowns of future government spending. The Dow turned optimistic about the potential passing of another Stimulus package...

and....

Mortgages went from here to there...

FN30_______________________                                 GN30__________________________

F.N 4.5 -------->>>> 100-21  to  100-19                            GN 4.5 -------->>>>  100-25  to 100-27

FN 5.0 -------->>>> 101-21  to   101-21                            GN 5.0 -------->>>>  101-28 to  101-28

FN 5.5 -------->>>> 102-10 to    102-06                            GN 5.5 -------->>>>  102-15 to 102-12

FN 6.0 -------->>>> 103-01  to  102-31                             GN 6.0 -------->>>>  102-31 to 102-27

So even after the TSY curve sold off and steepened in the process...MBS has stayed relatively stable!!! FED BUYING FED BUYING FED BUYING....DAY TRADERS DAY TRADERS DAY TRADERS!!!

Rate shoppers and rate lockers do have another hurdle to hop on the road to "it that shall not be named". Last week we learned that MBS portfolio prepays were not as widespread as expected in January. Instead of a Ref Boom in turned out that all we got was a Refi Thud which means MBS investors have a little room to move "up in coupon" while mortgage banks sort of their operational inefficiencies (don't forget servicers are taking additional bps to cover losses from delinquencies).This available "up in coupon" MBS buying opportunity translates into higher rates for mortgage seekers and leaves the Federal Reserve somewhat unaccompanied in their pursuit of lower mortgage borrowing costs. Day traders will nibble around the edges of the stack but we expect the majority of the non-Fed buying to take place in the 4.5 to 6.0 range.

Fortunately there is some room for lenders to absorb the higher cost of borrowing via slack in rate sheets, whether or not they are in the giving mood is unknown...but we must say that primary/secondary spreads did slightly improve last week. "Mortgage price leader" remains in the acceptable 40-100bps range over MBS coupons. This spread on average has been 40-100bps depending on your position in the mortgage banker supply chain.

Tim Geithner was scheduled to present tax payers with a plan to provide financial stability this morning...instead we got this press release from the Treasury Department...

Even though I was excited for Timbo's (searching for good nickname for Geithner still) plan I cant say I blame the Treasury Department for waiting it out until the politians are done their poo slinging...

In other news...

Tomorrow is Class A MBS Notification Day...we switch coupons over to MARCH delivery on Friday the 13th......scary. Lower coupon roll prices dropped as market participants await  4.0 supply from mortgage banks.

The US government may have no other choice but to force GM and Chrysler into bankruptcy...they have to protect the $17,400,000,000 that they lent to the automakers.

Read more of what I am reading at Around the Web <--LINK