After holding levels not seen since early this summer for over a week, mortgage rates are under some pressure to move higher.   Yesterday, mortgage backed securities were lower in price which forced lenders to offer higher mortgage rates.  The downward move continued all the way into close which led to  some lenders repricing for the worse.  MBS, after having been range bound near summer price highs, moved toward the bottom of that range yesterday and has actually fallen to lower levels following this morning's data.

Some of this morning's damage came from the Retail Sales report, which showed better than expected spending from the largest component of the economy.  As would be expected, the stock market moved higher following the release.  MBS and tsy's moved significantly lower increasing the probability of higher rates this AM.  Though the robust results were expected due to the "cash for clunkers" program, even when that data was factored out of the so-called "core" reading, results were still significantly better than expected.  This runs contrary to a popularly held conception that consumer spending will be the biggest detractor from a predictable economic recovery.  An important thing to remember is that the "best in 3 years" statistic refers to the "month over month" pace of change, not some metric of how much consumers are actually spending.  The last time retail sales changed at this pace, the annual rate of improvement was a positive 3% compared to the current negative 5%. READ MND STORY

In other data, the Producer Price Index (PPI), which measures price changes of certain goods at the producer level, increased much more than expected.  When the more volatile components of food and energy are factored out, the increase stood at 0.2% versus an expectation of 0.1%.  The markets would need a much more convincing argument if any sort of inflation fears were to take root, especially when voting members of the Fed are saying that the their bigger concern is doing enough to keep prices HIGH ENOUGH, such as San Francisco Fed President Janet Yellen said in a speech yesterday.    For perspective on that, consider that the year over year chance in the PPI shows prices DOWN 4.3%. READ MND STORY

The last significant piece of data, released by the NY Fed in the form of their manufacturing survey showed continuing improvement in business conditions in the NY region's manufacturing sector.  Though not a tier one report, if other manufacturing related reports, such as the Philly Fed survey, durable goods, etc... corroborate the results, the market's perceptions about the broader manufacturing can be positively affected.  The general implication there would be for stocks to improve and for bonds to deteriorate.  As it stands, considering that last month's report showed the first positive reading since 2008, it's too early to call that ball. READ MND STORY


At 10am eastern, Federal Reserve Chairman Ben Bernanke delivered a speech on the year of the crisis to the Brookings Institute.  Though not technically "economic indicator data," any time Bernanke speaks, markets listen.  Today appears no exception as the most notable recovery for bonds occurred during the speak as he reitterated previous caution on the slow pace of the recovery despite saying that the recession is likely over from a technical perspective.   Matt and AQ over at the MBS Commentary blog will cover any important events that transpire during his speech.  His words always have the ability to rattle the markets. 

Following the three better than expected economic reports, the pressure on MBS continues which should lead to higher consumer borrowing costs this morning.  For more on the economic data released this morning, click here.

Reports from fellow mortgage professionals indicate that mortgage rates did worsen overnight.  The par 30 year conventional rate mortgage is in the 4.875% to 5.125% range for well qualified consumers.  In order to secure a par interest rate you must have a FICO score of 740 or higher, a loan to value at 80% or less and pay all closing costs including one point loan origination/discount/broker fee.  If you are looking to secure a 15 year fixed rate mortgage, you should expect a par rate in the 4.375% to 4.625% range.  To qualify for the 15 year par rate you must have a FICO score of 620 or higher, a loan to value at 80% or less and pay all closing costs including one point.