Yesterday loan officers got an early afternoon reprice scare following a sell off in the thinly traded MBS market. Overall, besides the reprice alert, it was a sleeper of a day.  Mortgage backed securities traded, again, in a very tight range closing at the same level they opened.  This should allow lenders to continue to offer well qualified borrowers a par 30 year fixed conventional mortgage rate in the range of 4.625% to 4.875%.


The economic calendar is light today with the only relevant data being the release of the Federal Reserve's report on Consumer Credit. G.19 Consumer Credit gives us the dollar value of consumer installment credit outstanding.  If consumer credit is increasing it is a sign that consumers are spending, which is a positive signal for the economy. Negative implications can be taken away because more spending can lead to future inflation.  MBS prefer moderate growth which helps to keep inflation in check. Inflation is not of concern to investors at the moment.  Economists are expecting this report to show that consumer credit, month over month, had declined by -$3.0bn after an unexpected rise in January of -$1.8bn. Are American's spending more money they don’t have?


Earnings season gets started today. Many equity investors are beginning to view the stock market's recent run of optimism as a "bear market rally". These market players will display this outlook by selling any news of "weaker than expected" company earnings releases. This bias has the potential to indirectly influence the MBS market through a "flight to safety" rally in Treasuries. Higher MBS prices imply lower mortgage rates. We call this the "stock lever". The stock lever demonstrates the flow of money between risky stocks and safe bonds.   Investors basically have 2 areas that they invest into, equities (stocks) and debt (Treasuries, MBS, Agency Bonds, etc..).  Typically, on days when the stock market is up, the fixed income (debt) market is trading lower, and vice versa.


Headline news remains a constant risk.  On slow economic data days, investors will look deeper into news headlines for  any indicative clues regarding future economic conditions.  One headline that crossed tapes this morning was that Europe’s recession has deepened more than expected.  Since we live in a world economy, it is important for us to look at overseas data.  This news could be considered a positive for US debt markets, MBS included, as global investors seek out safe havens within the US financial system.


Considering the economic calendar is light and earnings reports are not scheduled to hit the wires until after market close, barring any blaringly optimistic headline news, I suspect we will have another sluggish day in the mortgage market. It will be very difficult for MBS to have a big rally, but if the stock market closes in the red and treasury yields move lower, we should at least have marginal MBS improvements which will provide rate sheet stability. On the MBS Commentary Adam outlined a rather complex topic that may help you better understand why certain rates on lender price sheets have a higher probability of falling from 98.500 to 95.500 overnight. Read More: MBS Commentary.


So far this morning, fellow mortgage professionals are reporting lenders rate sheets to be slightly improved over yesterdays.   This is keeping 30 year fixed rate mortgages in the 4.625% to 4.875% range.  Over the previous few days, we have been seeing lenders rate sheets worsening, so it is nice to get some improvement even though the improvement is very modest. 


For intraday updates, remember Matt and Adam’s MBS Commentary!!!