Market Update Monday December 8th 2008

Today mortgage backed securities (MBS) have opened on the downside following last week’s trend. 5% last week was costing a point, while today 5.5% is costing a point. After the big rally we have been on it is not uncommon to see a sell off especially at years end when investors are trying to prepare their balance sheets.

This week is light interims of data, with the most important reports coming on Friday.

Tuesday

- Pending home sales index, economists expecting -2.3% after last months -4.6%

Thursday

- Trade Balance, economists expecting a -54.0b after last months -56.5b

- Jobless claims, economists expecting 515,000 after last weeks 509,000

Friday

- Core Producer Price Index, which is a measure of inflation on the producer level. This report is not as important as consumer inflation due to producer’s reluctance to pass higher costs to the consumer. The core reading strips out food and energy. Economists expecting a .2% reading after last months .4% increase.

- Producer Price Index, economists expecting a drop of -1.8% after last months -2.8% drop. Much of the drop can be credited to the drop in oil prices.

- Retail Sales, economists expecting a drop of -1.8% after last months -2.8% drop.

- Retail Sales excluding Autos, economists expecting a -1.7% drop after last months -2.2% drop.

- Consumer Sentiment, economists expecting a 58.0 reading after last months 55.3 reading.

So far today, I am floating this morning as the second round rate sheets have yet to come out but should be hitting our emails soon. It will be interesting to see how investors price those rates sheets this morning but in my opinion we should see 5.125 to 5.25 being par rate with most lenders.

If we can hold these gains and improve some more, we should even see 5.0 par with some lenders. But days like these, lenders are somewhat conservative in pricing especially in light of MBS first selling off pretty dramatically this morning.

If you have any questions or topics that you are interested in please let me know, I am happy to help with your education.

Please forward this info along to your clients, family, friends, and coworkers, as education is important for everyone. I hope you enjoy the rest of your day and have a prosperous week.

Cheers,

Ian R Bennett

Mortgage Banker