Mortgages continue to take their directional guidance from the yield curve and the stock lever this morning.  You are generally accustomed to monitoring the 10 yr Treasury note for your own personal mortgage rate guidance...this is a fair assumption to make however I must point out that MBS buyers are doing their own spread analysis using a wider range of benchmark notes. Rate sheet influential production MBS coupons are expected to have a much longer life than the MBS coupons being churned for profits by the majority of non Fed buyers. Watching the 10 yr Treasury yield for an indication of "reprices to come" is probably the most readily available comparison for you to make...we would however advise watching a 10 yr  swap rate for a more stable indicator of MBS price shifts. For shorter duration "up in coupon" MBS we would recommend keeping track of the 2 yr or 3 yr TSY note yields.

FN30_______________________________

FN 4.0 -------->>>> +0-06 to 99-30 from 99-24

FN 4.5 -------->>>> +0-05 to 101-22  from 101-17

FN 5.0 -------->>>> +0-04 to 102-30 from 102-26

FN 5.5 -------->>>> +0-04 to 103-25 from 103-21

FN 6.0 -------->>>> +0-04 to 104-18 from 104-14

GN30________________________________

GN 4.0 -------->>>> +0-06 to 100-01  from 99-27

GN 4.5 -------->>>> +0-05 to 101-27 from 101-22

GN 5.0 -------->>>> +0-03 to 103-14  from 103-11

GN 5.5 -------->>>> +0-05 to 104-03 from 103-30

GN 6.0 -------->>>> +0-02 to 104-18 from 104-16

Illustration of MBS being more stable than US Treasury Notes. This morning 10 yr Treasury prices shot up at 9AM but quickly fell around 915AM....but MBS stayed relatively stable throughout.  Then around 10am MBS and TSYs rallied. Following the rally TSY prices fell again...and MBS bids remained stable.

MBS does take its directional guidance from the yield curve but has seldom reacted to the same extent that TSYs have sold off or rallied. When TSY sell off....dont expect MBS to sell off to the same extent (yield spreads tighter). When TSYs rally do not expect MBS to be able to keep up (spreads wider). When MBS sells off mortgage buyers will view the cheapening as a buying opportunity. When MBS gets too expensive, expect mortgage sellers to be eager to allow prices to cheapen...then the cycle restarts! Supply remains the biggest enemy of production MBS, profit taking and the liquidation of "flight to safety" (stock lever) will be the enemy of "up in coupon" market participants.

I have seen a few DU Refi Plus rate sheets this morning. The investors I have had the opportunity to review have imposed  additional risk premiums for their DU Refi Plus offerings. Give it some time for lenders to get comfortable with selling these loans to the GSEs. Once investors familiarize themselves with the process flow, more lenders will join in the DU Refi Plus party and the market should become more competitive. As far as regular old C30 programs...rates are mixed this morning...some higher some lower.

The Treasury Department announced today that it will extend through Friday April 24, 2009 the deadline for the submission of applications to its legacy securities Public-Private Investment Program (PPIP).

"To better accommodate increased participation, the deadline for email submission of applications has been extended to 5 p.m. ET on Friday, April 24, 2009.  Treasury now expects to inform applicants regarding preliminary qualification on or prior to Friday, May 15, 2009.  The Treasury Department requests that all applications be submitted via email only."

Many analysts believe the deadline  extension is a sign that banks will be unwilling to participate in PPIP.

Stock markets have moved lower at the open following an influential analyst downgraded several bank stocks. The Dow is down 1.30% The S&P is down 1.57%. The NASDAQ is down 1.70%.

Vic outlined the Economic Calendar for the Week Ahead