Mortgage backed securities are rallying this morning on weaker then expected economic data.  Here are the numbers

-          <![endif]>Jobless Claims up 26,000 from last week to 542,000 much higher then expected

-          <![endif]>The continuing claims number remains at a very high level of 4.01 million

-          <![endif]>The 4 week moving average moved higher to 506,000 

These are some of the highest levels since the early 1980’s and this continues to show a very weak labor market which helps to keep wage based inflation in check as employers do not have to entice you with higher pay to hire you.   This is good for mbs as inflation is our mortal enemy. 

-          <![endif]>Philadelphia Fed Index came in lower then expected at -39.3 when economists where expecting -35.0.  This show continued weakness in the manufacturing segment of our economy.  This is a plus for mbs.

-          <![endif]>Leading Indicators came in lower as well at -0.8% with expectations of -0.6%.  Again, this shows more weakness in our economy which I am sure is a shock to anyone reading this. 

Currently mbs are up 13 ticks from close yesterday but only a few ticks above the highs from yesterday.  We are still battling a very tough resistance level and in the past 2 months we have not been able to close above that resistance.  Is today the day we finally break out and move to lower rates?  Hard to say, but all the ingredients necessary are here but so is fear and uncertainty.  So far this morning, the rate sheets we received do show the lowest rates we have seen for a couple months.  However, over the last few days, we have been to this level just to have a late day sell off and close below the resistance.  You are safe for now floating, but by day’s end you might want to consider locking but you need to allow time for lenders to price in the gains we have seen this morning.  Keep your finger on the lock button as things can turn quick.  The Dow is down 196 points, if we start to see a rally it could be at mbs expense, so keep your eye on the Dow.  In other positive news, oil is down again over $3 and is right around the $50 per barrell mark.  The lower oil price is the main cause of inflation being so low and the lower prices are helping Americans spend money in other areas.  Just imagine how our economy would be right now with gas still at $4 a gallon. 

Stayed tuned and will post back if we see a big move down.  Hopefully this will be the day we can close higher and set the stage for lower rates in the weeks and months to come.