Closing marks as of 3pm close yesterday...

FN30______________________________________

FN 4.0-------->>>>  -0-24 to 98-09 from 99-02

FN 4.5 -------->>>> -0-14 to 100-11  from 100-25

FN 5.0 -------->>>> -0-07 to 101-23 from 101-30

FN 5.5 -------->>>> -0-03 to 102-12 from 102-15

FN 6.0 -------->>>> +0-01 to 103-07 from 103-06

Ok so I know its been awhile since I gave you GNs. I will only provide on end of day post. During the day FNs,GNs, and Golds follow each other enough to give you an idea of where GN/FRE pricing is heading. fair?

GN30______________________________________

GN 4.0 -------->>>> -0-21 to 98-12  from 99-01

GN 4.5 -------->>>> -0-15 to 100-14  from 100-29

GN 5.0 -------->>>> -0-07 to 101-31 from 102-06

GN 5.5 -------->>>> -0-02 to 102-18 from 102-20

GN 6.0 -------->>>> -0-01 to 103-08 from 103-09

ok so everyone appears to be somewhat bewildered by the current behavior of MBS. Acceptable response considering we had a 20 tick selloff immediately following a  Presidential approval of mortgage feasting for all. After 20 months of playing "survival of the fittest" its ok to be frustrated.

There is simple reasoning behind your sell off. The market doesn't believe that "it that shall  not be named" will happen in the immediate future. Market participants were intially willing to jump on the band wagon  but over the past few days the "down in coupon" bus has begun losing its passengers. Actually today accounts of all kinds vacated their short lived "down in coupon" positions in favor of fatter yields on the fuller side of the stack.

Plain and Simple: "It that shall not be named" (prepay risk) is getting no respect from MBS buyers...market participants view borrower prepayment behavior as "spotty"at best. A refi here...a refi there feeling. (A problem that can be solved in the market for specified pools. rolls on 6.0s ticked up today too) Unfortunately for borrowers this has resulted in higher mortgage rates.

We are indeed pacing the general direction of the TSY market.

Debt supply remains a constant irritation to market participants seeking entry and exit points in the TSY market.  $94bn in new TSY supply hits markets this week...$22bn of which is the re-opening of the 84 month issuance(tomorrow). That doenst include cash management bills either. Plus President Obama made it quite clear that his administration doesn't plan on slowing their speed of spending any time soon.

Lately the MBS stock lever has been functional in one capacity...directionally. Stocks feel sad, investors run for safety, US TSY yields fall, MBS bids are better, and mortgage rates fall.  Stocks feel happy, money comes out of hiding, TSY yields rise, MBS sells, and mortgage rates move higher. Hmmmm...this implies that we are currently taking guidance from a group  of investors basing their trading decisions on the speculative interpretation of every little detail in press releases, news conferences, and political hearings. Markets are looking for direction.

Plain and Simple: we already know things are bad, markets want to know how things will get better. We are waiting for someone in the Obama Adminstration to properly explain themselves. We are waiting on more DETAILS!!!!

But why did MBS seemingly sell off more than usual today? It has been relatively stable during some choppy trading sessions lately...

Remember I said MBS market participants are jumping off the "it that shall not be named" bandwagon? Well this means MBS accounts have no interest in buying 4.5 coupons right now...instead they are taking a chance on 6.5s and 7.0s (told  you why in this post...CLICK TO READ WHY?) So today when mortgage banks dumped their load of 4.5s onto the TBA MBS market there was no one there to buy them....well except the Fed. With TSYs selling and MBS following....anyone who was interested in buying the originator offering of 4.5s could  afford to let their bid slide a few extra ticks (remember TSYs were selling off).... which is why the short end of the stack sold off more than the fuller side. (See pricing above)

Fortunately during up in coupon market phases any weakness in MBS prices has created an opportunity for day traders to anti-up and play the profit taking game again.

Plain and Simple: when MBS sells off it isn't long before they are cheap enough to buy again. Rate sheets will remain erratic and dont be surprised  if you see 50bp day over day changes.

But what about when we get more details on the Homeowner Affordability and Stability Plan on March 4? Will the stock lever continue to move MBS money?

Think about it. If new details instill confidence in equity markets it is most likely because the herd believes the plan will be effective in its objectives. So optimism should arise from political progress on the core problem at hand..depreciating housing related assets. Housing positives SHOULD (if the objectives are to be met) imply more demand for "down in coupon" MBS buying and another chance for all out "it that shall not be named". The HOPE is that the details of the plan are effective enough to scare MBS investors into prepay protected MBS positions (4.0s and 4.5s). Then MBS will be much more insulated from the effects of the stock lever and TSY supply.

If the details are not adequate...well "up in coupon" sticks and the Fed becomes the lone buyer of 4.0s and 4.5s. Erratic lender pricing strategies will stay in place and borrowers will continue to jump "off the fence" in short spurts. The stack will stay stagnant...

How can you help?

Loan Officers: While MBS is moving up in coupon there will be short spurts of aggressive mortgage pricing. Dont jump at it initially, but be sure not to pass on interest rates you and your borrower can agree on. Do your best to compromise with your borrower on fees. The market is SUPER COMPETITIVE and it stinks to lose a deal for an UW fee.

Borrowers: do your best to give your loan officer first shot at any rate matches another lender may offer you. Your loan officer works very hard to work up your loan file...dont throw them under the bus for a few hundred bucks.Rates will be good intermittently so stay in close contact with your mortgage professional. Ask questions if you believe something is amiss...there are plenty of honest mortgage bankers and brokers who will gladly offer up their advice and opinion.

Lets see if we can help lender pull through a little here....