Yesterday, mortgage backed securities managed to have a small rally and close higher by about .375 in discount. When I say we closed higher by .375 in discount I mean that if a rate was costing .375 in points that rate would cost nothing today. The main driving force for the improvement was a big rally in treasuries which drove the yield from over 3.03 to as low as 2.88 on the 10 yr Treasury note. Unfortunately, overnight we have given back most of the gains but we are still higher than where we opened yesterday. We can give treasuries the credit for the improvement yesterday and we can blame them this morning for the loss. Currently, the 10 year Treasury note is moving back higher and is at a yield of 2.95. It seems of late that mbs are very much attached to treasuries, following them higher and lower but to a lesser degree.
The only economic report we get today is pending home sales. Historically speaking this report is not a market mover and that should hold true today. The report was just released and it shows that pending home sales are down 7.7% from last month. Later today, Federal Reserve Chairman Ben Bernanke and Treasury Secretary Geithner, testify on the U.S economy in front of the Senate Budget Committee. They will be taking questions regarding the U.S economy and the huge budget introduced by President Obama, so it should be interesting. As always, investors will be listening to every word they have to say as their comments can and will have an effect on all markets. Highlights and anaylsis of the testimony will be posted on the professional blog, MBS Commentary, later today.
Tomorrow we are supposed to get word from the Obama Administration on the Homeowner Affordability and Stabilization Plan. We are hoping to hear details, details, details!!!! Up to this point, team Obama has been very disappointing with giving details of what they plan to do to stabilize the housing market.
Early reports from other mortgage professionals are showing rates to be about .125 better in discount. This will continue to keep par 30 year fixed conventional rates anywhere from 4.875% to 5.125% depending on the lender. Just like the past couple weeks, you should be able to keep an eye on treasuries for a sense of how well mbs are doing. As I have been typing this update, treasuries and mbs have both improved slightly in price which drives the yield lower. If this trend can continue, it could lead to better pricing later today. If anything major happens, I will get back to you.