What happened last week? Mortgage backed securities (MBS) gained +42 basis points (BPS) from last Fridays close which caused 30 year fixed rates to move lower for the week. We saw our best rates on Friday and our worst rates on Wednesday. We had a slew of Talking Feds which included many district Federal Reserve Bank Presidents as well as Ben Bernanke. They pretty much carried the same message: The economy is growing at a moderate pace and the labor market is slowly improving (this was also mirrored in the release of the Feds Beige Book) and if the economy continues along the path that they have forecasted, then further reductions in their monthly Treasury and agency mortgage backed securities should be expected. If that does occur, then naturally fixed rates will continue to rise at a very slow but consistent pace. We had some very tame inflationary data with both the headline Producer Price Index (PPI) and Consumer Price Index (CPI), 0.4% and 0.3% respectively. Retail Sales beat estimates and Initial Jobless Claims were better than expected. We even had some improvement in manufacturing data out of NY and Philly. But offsetting that positive economic data was a dismal reading for Continuing Jobless Claims, and a weaker than expected preliminary reading of the Consumer Sentiment Index. Housing Starts were stronger than expected but offsetting that was Building Permits being weaker than expected. Overall, we had a mixed bag of economic news but nothing to cause our benchmark FNMA February coupon to sell off or break above our 100 day moving average. MBS had a nice rally on Friday as traders parked their funds into U.S. backed bonds ahead of the long weekend and temporarily pushed our benchmark pricing to trade above the 100 day moving average but in the end we closed back below it which is an important technical signal that indicates that is the top end of our range.
Posted on: Tue, 21 Jan 2014 22:30:00 +0000