Mortgage backed securities (MBS) prices are higher (rates lower) after a government report showed U.S. consumer prices fell for the 1st time on an annual basis since 1955 indicating the recession is keeping inflation in check

The consumer price index (CPI) decreased 0.1% in March and prices fell 0.4% in the last 12 months leaving the Fed roam to continue its quantitative easing. with inflation a distant concern, the Fed will pump money into financial markets to unlock credit and revive growth. Others caution that in the longer term the unprecedented fiscal stimulus, policy of buying debt and pumping money into the financial system will reignite inflation.

Industrial Production dropped 1.5% last month, more than anticipated, as factories slashed workforces, closed factories, cut production and trimmed unwanted stockpiles. Capacity Utilization fell to 69.3%, lowest level since 1967.

The Empire State index rose to a minus 14.7 from minus 38.2, higher than expected, and the outlook for the next six months improved.

Easter/Passover likely held down mortgage applications according to the Mortgage Bankers Association weekly survey, both purchases and refinances were down 11%.