The data this morning, though not outright damaging to MBS is also not of any help.

  1. ADP's employment report came in at a reading of 8000 jobs on the upside.  Historically, if ADP happens to accurately predict the actual employment data that follows 2 days later, it is only by uncommon coincidence.  Traders don't put a lot of stock in this report, but it still causes some action, and better than expected job growth is more fuel to the fire of a rallying market.  This pulls money out of bonds, of which MBS are a part, thus increasing interest rates.
  2. The Mortgage Bankers Association reported a drastically lower volume of application activity for both refinances and purchases.  This data is usually not a big cause for concern among MBS traders as it is more of a result of their pricing than a cause of it.
  3. Best Buy beat earnings forecasts.  This is significant to me at least because companies like best buy speak directly to the "consumer," who everyone has been saying is so weak recently.  This data seems to contradict that in a way, but that conclusion, despite being somewhat beneficial for the markets, is not of major concern to MBS traders.  It's only factor inasmuch as traders are enticed to move money back over to stocks.
  4. KeyCorp may buy the troubled mortgage lender National City, who has already shut down numerous facets of their operation.  Moves like this one do two things: on the good side, they reassure investors about stability which can help liquidity in the MBS market, and secondly they reassure investors about stability (is there an echo in here?) which instead of affecting MBS directly, can instead cause buying of stocks as investors become less concerned about future losses.  So data like this is more by the way of letting you know about potential big headlines.  The effect would be totally dependent on the circumstances upon which it was announced.

All this combined with yesterday's poor showing for MBS has us extending our losses a bit currently, despite the good 'ol DJIA opening a bit lower.  We're down about 7/32nds in the 5.5% coupon, which should ding today's rate sheets around .25 today depending on how your lender priced yesterday. 

So with MBS and Stocks down at the same time, it's almost as if the market is waiting for something.  That something would most likely be the live testimony currently underway where uncle Ben is getting questions regarding recent policy decisions.  Stay tuned for market reaction to this as well as the pending Factory Orders numbers.