Swine Flu outbreaks, unannounced low flying planes in Manhattan, and a revised Viability Plan from General Motors were all reason for global investors to move their money from risky stocks to the safety of treasuries and MBS. This "flight to quality" helped prices of mortgage backed securities (MBS) to move substantially higher. By the end of the day most lenders had republished more competitive rate sheets which resulted in marginally lower mortgage borrowing costs. This morning, although stocks are rallying off their lows, MBS is holding on to early morning gains. This should allow most lenders to offer par 30 year conventional rate mortgages in the 4.5% to 4.75% range for the best qualified consumers.   For consumers looking to refinance to shorter terms, you should expect to get a 15 year fixed rate mortgage in the 4.25% to 4.5% range. 

No economic reports where released yesterday, but the Treasury Department successfully auctioned off $40billion 2 year treasury notes which helped fuel the rally in the MBS market.  Indirect (foreign) investors bought almost 30% of the offering.  MBS saw the majority of their gains following the auction results at 1pm eastern as the flight to safety continued throughout the day.  If you would like to see a graph of yesterday's action please visit the MBS Commentary Blog.

Today starts our busy week of economic data.  First, the Federal Open Market Committee begins day 1 of their 2 day policy setting meeting. The FOMC will release their statement tomorrow afternoon. The Fed statement, which will announce any changes to current monetary policy and provide an outlook on future economic growth or contraction,  is one of the most influential events for the market.  Although we have been surprised by the outcome of these meetings recently, the fed funds rate is already at its lowest possible levels and quantitative easing efforts are at full throttle, so we dont expect to hear any unexpected verbiage from the Federal Reserve.  But you never know...the FOMC may have an ulterior motive. The MBS Commentary blog will cover the statement tomorrow in great detail after it is released at 2:15pm eastern.

The S&P/Case Shiller Home price index was released this morning. This report tracks the changes of value in single family residences in 20 metropolitan regions across the US.  As home values have declined over the last couple years, consumers have reduced spending because of a loss of home equity. This has been a major contributor to the overall weakness of our economy.   Many economists believe that until home prices stabilize and start to move higher, our economy will not turn the corner and resume growth. The market is very focused on the health of the housing!  

The report, unfortunately, has shown that all 20 metropolitan regions continue to decline in value, albeit at a slower pace.  Year over year, home prices have declined by 18.6% and from last month prices have declined 2.2%.   The worst declining areas are the city of Phoenix, Arizona which year over year has posted a 35.2% decline and Las Vegas coming in a close second at a decline of 31.6%, month over month they declined 4.5% and 3.6% respectively.  

Are you seeing increased home buying activity in your neighborhood?  Are homes selling quicker? Are more homes going on the market? How are your property values?  Do you feel we have reached the bottom in housing?

We also got the release of Consumer Confidence, a survey of how consumers feel about present and future economic conditions.  A pessimistic consumer is much more likely to save money than to spend it.  Our economy needs consumers to spend in order to grow.   Last month's reading moved slightly higher hinting that consumers may feel the economic bottom is near.  Consumer confidence came in at 39.2,much higher than expectations for a reading near 29.5.  Right after the release, the stock market moved higher and MBS moved off the highs of the day but remained stable.  Are you optimistic the economy is near the bottom of its downward cycle? 

At 1pm  the Treasury Department will auction off $35billion 5 year treasury notes.  Since the average life of new mortgages is closer to 5 years than 2 years, this auction is more relevant to MBS than yesterday's 2 year Treasury note auction.  The additional supply of debt on the market can apply pressure on treasury yields to move higher which places pressure on mortgage rates to follow.  Hope for good demand!

Early reports from fellow mortgage professional indicate several lenders are offering 4.5% near par for a 30 year conventional rate mortgage.  Today's rates are about as good as they have been in quite a while.  If you have been sitting on the sidelines, you may want to consider moving forward and locking in your rate.  Each time we have approached these rates, lenders have been inundated with locks, so in an effort to calm the chaos those lenders have increased rates. Be aware of this as MBS prices approach all time highs.  

For intraday updates, check out the MBS Commentary blog.