Market Update Monday October 27th 2008

Good Morning,

After a slightly positive open, we have turned south and the sellers are outnumbering the buyers. Rates look bleak so far today.

Last Week:

Mortgage Backed Securities had some improvement at the beginning of last week, although they could not sustain any meaning full rally and lost any gains by the end of the week. As a result we ended with mortgage rates finishing the week where they started. All of this in spite of a large selloff in stocks, which normally helps mortgage bonds, and mortgage rates.

This Week:

The Federal Open Market Committee meets on Wednesday with the policy statement and rate decision. It seems that the MBS market has priced in 5% cut to the Federal funds rate, it is possible that we will see another round of rate cuts by central banks around the world, to bolster the still-ailing financial system.

As I have mentioned in previous writings, the Fed does not directly control mortgage rates. A Fed rate decision and policy statement can push markets in ways we cannot predict, as 80% of the time when the Fed cuts rates, mortgage rates often rise.

Other economic events this week are;

This morning; New HomeNew-Home Sales Rose in September From 17-Year Low

Wednesday: Durable goods orders report

Thursday: Gross Domestic product

Friday: Personal Consumption Expenditures

All three of these reports listed are important to pay attention to as they could be market movers, as well as evidence of our economy in recession.

Cheers,

Ian R Bennett

Mortgage Banker