Yesterday, mortgage backed securities had another negative day increasing consumer borrowing costs.  So far this morning that trend is continuing after the release of Non Farm Payrolls.  In total, consumer borrowing costs have increased by about .25 to .375 in discount over the last 2 days.  We should see par 30 year conventional mortgages inch slightly higher to a range from 4.625% to 4.875% for the most qualified consumers. 

Onto the big news of the day, the Employment Situation report.  The Department of Labor reported this morning that the United States lost 663,000 jobs last month while estimates called for a loss of 654,000.  January’s numbers where revised much lower from a loss of 655,000 to 741,000, which is the most jobs lost in a single month since October 1949!  February’s numbers where left unchanged at a loss of 651,000.   Since the recession started in December of 2007, our economy has lost 5.1 million jobs.  The unemployment rate came in right on expectations rising from 8.1% to a rate of 8.5% which is the highest reading since November 1983.  Imbedded within the report are hourly earnings which came in right on expectations of an increase of 0.2% in wages showing that wage based inflation is holding steady.  All in all, these numbers should be a positive for MBS, but so far we are not seeing any love.  This could be due to the G 20 meeting that President Obama is attending in Europe.  There seems to be quite a bit of optimism that brighter days are just ahead.   Even though the jobs outlook continues to be quite depressing, you must keep in mind that this report is backwards looking while the markets look forward and jobs are one of the last things to recover from a recession.  Adam, over at the MBS Commentary Blog, will be going in depth on the employment situation, please check it out.

Also out this morning is the ISM Non-Manufacturing index.  This report gives investors insight into the strength of our non-manufacturing segment of our economy by surveying hundreds of firms across the United States.  Readings under 50 indicate a contracting economy while readings over 50 indicate an expanding economy.  Since MBS prefer a slower growing economy, they usually benefit from a lower than expected reading.  The report came in at a reading of 40.8 which is pretty much in line with expectations of 41.0.  No reaction from the markets.

A little later today, Fed Chairman Ben Bernanke will be giving a speech to the Richmond Fed’s 2009 Credit Market Symposium.  As always, investors will be listening in to what he has to say as his words can definitely move the markets.

Early reports from fellow War Room mortgage professionals are showing lenders rate sheets to be slightly worse.   It has been pretty common lately for lenders on Friday’s to be much more conservative with the rates they offer.  They also have very itchy trigger fingers when MBS move lower to reprice for the worse, but when MBS move higher that itchy trigger finger seems to loose its itch and they are very hesitant to pass along improvements.

I will get back to you later today with an end of week update.  Thank Goodness it’s Friday!!!