Yesterday, mortgage backed securities (MBS) lost a little ground. Investor's rate sheets this morning are anywhere from .25 to .50 worse in discount (Cost to the borrower) This will keep par interest rates (customer paying origination) from 4.875 to 5%.

It appears that the main cause of the loss yesterday was a late day rally in the stock market. This can be referred to as the flow of money; investors sell their MBS and treasuries and move the money over to the stock market.

Mortgage backed securities, treasuries, stocks, etc.. all compete for the same investor dollar; so quite often if the stock market rallies it is at the expense of the MBS and treasury markets and vice versa.

The only economic report to be released today was consumer sentiment. Economists where expecting a reading of 61.0; however, the number came in much lower at 56.2. This report gives investors insight in to how the consumer is feeling about our economy, and the likelihood of future consumer spending.

It appears the consumer is not very excited about the economy and not likely to be spending money, which is not great news for the economy. Usually, with a lower reading we would see a rally in MBS and a sell off of equities. However, since the release of this report, the stock market has turned positive and MBS continue to be pressured lower.

If the DOW continues to rally today, expect MBS to move lower which will result in investors repricing for the worse. It appears that you can also keep an eye on treasuries for a sense to how mbs are doing.. If treasury yields continue to rise, mortgage backed securities are likely to follow.

Today the bond market closes at 2pm Eastern and will be closed on Monday for Presidents day. With a 3 day weekend ahead for banks, it has been reported from a fellow mortgage professional that some lenders are increasing rates higher then normal today due to the long weekend and that they will likely reprice for the worse later today even if the market holds steady. Why would a lender do this?

Over a 3 day weekend a lot of events can happen that could dramatically move the markets when they reopen on Tuesday. Thus, the investors will be conservative on the rates they offer in case news happens that causes a sell off of MBS, which would lead to higher mortgage rates.
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.
Enjoy the rest of your Friday, and have a great three day weekend.

Cheers,
Ian R Bennett
Mortgage Banker