Mortgage backed securities (MBS) prices are higher (rates lower) as investors are concerned about the administration's suggestion that the economy will continue to contract in the coming months and the swine flu outbreak has caused a move out of stocks and into safer fixed income investments, like MBS.

No economic data will be released today but there is a 2yr note auction at 10am pt which will be watched for any change in demand or reduced purchase by foreign central banks (China).

The Fed is prepared to purchase Treasuries today as part of plans to cut borrowing costs. Signs the credit markets are functioning better include: 3mo LIBOR has fell 20 straight days to 1.05%, 30yr fixed mortgage rates are 192bps above the 10yr note, still above the 175bps average but below the 307bps on Dec 19th 2008, and "jumbo" mortgage rates fell to 6.34% from 7.65% in October 2008.