Mortgage backed securities (MBS) prices fell (rates higher) as investors seek higher yields amid concerns borrowing by the Treasury will overwhelm demand and signs the economy is stabilizing.

Todays economic data was mixed; Housing Starts reversed course in March, posting a sharp decline of 10.8% and significantly below the consensus forecast. However, the multi-family component plunged 29% while single-family starts were unchanged. Permits also resumed a downtrend, declining 9% in March to a record low. The report shows that this sector remains under pressure from excess supply of unsold homes. A flood of bank-owned properties is hitting the market as the recession deepens. Foreclosure filings rose 24% to a record in the 1st quarter as temporary programs to delay action on defaults comes to an end.

Falling home prices and rising unemployment will contribute to further increases in defaults as more homeowners find themselves owing more than their houses are worth. U.S. jobless claims fell 53K to 610k, but the latest data is from the Easter/Passover holiday shortened week.

Continuing claims however increased 172k to another record at 6.02 million people collecting benefits. The Philadelphia Fed Index improved to minus 24.4, deeply negative but again indicate that the pace of contraction is slowing. The current improvement in orders points to improvement in output ahead. Overall the bad news is not as bad & the good news is not as good.