Friday was a very good day for MBS, so good in fact, that despite some losses this morning, we probably won't see a deterioration in rates unless lenders hedge their bets for the worse.  The reason for this is that the improvement in rates on Friday lasted right through close, which doesn't really give lenders the time or the confidence to pass those gains on in their rate sheets.  So at the close of business, there was still some "extra" improvement that should have been on the rate sheets that was not. 

In cases where the day ends strong, we want to take a look more at the raw MBS price as opposed to its day over day change.  The raw prices tell the story this morning much better than the movement.  Here they are:


MBS Price Data
FNMA 4.5
96-13 /15
FNMA 5.0
98-30 /31
FNMA 5.5
101-01 /01
FNMA 6.0
102-17 /18

* chart as of 9:17 AM EDT

Pulling the bond market down right now is some positive news for stocks.  In news this morning, a private equity firm, TPG, announced a 5 billion dollar investment in WAMU.  Other blue-chips are also faring well before the open.

With limited economic data for today (all we have is the relatively unimportant consumer credit report later today), the focus will be on stocks, headlines, and flows (inventory and demand among MBS traders).  It is a light volume day so far which always opens the door for volatility.

One nice thing to note about this morning is that, as MBS opened down in what seemed to be a continuing trend, they showed some great resilience right at key levels (around 99-00 for the 5.0% coupon and around 101-00 for the 5.5% coupon).  This is promising news for the rest of the day, but we're still at the point where "anything can happen." So stay tuned...