1/28/2008 - Monday Morning

We begin the week with expected volatility as the financial markets scurry to take up their battle positions before the tumultuous week ahead.

MBS's are holding their gains from Friday, and have currently gained an additional 4/32nds which should be good for a slight price improvement this morning.  NOTE: This is one of those fantastic days to appreciate MBS data as opposed to 10 year treasury as they are moving in opposite directions this morning!

Even with the New Home Sales report coming in 4.7% down, at a 13 year low, the markets are near unchanged.

Expect volatility today and this week.  It's still anyone's guess, but remember, in general, the weaker the economic data, the better rates will get.  If our recessionary slide continues, we could get back under 5% on PAR 30 years.

If, on the other hand, this week's data shows signs of a rebound, rates can snap higher with alarming speed.

 
To lock or not to lock.

As always, I recommend you digest the data and make your own decision based on your risk tolerance.  Even though I think this week will bring bad news for the economy thus bringing rates lower by Friday, the risk that it will not may not be worth taking.  We had improved prices on Friday, and may hold them today.  The market is not reacting violently to any data today because it is waiting to react violently for the big data later in the week!  Yes, I personally feel that the data will be in our favor, but am still locking to remove the risk that it is not.  Yes, we will all wish we would have floated if rates drop this week, but the drop that would come from bond-friendly data is not nearly as sharp as the rise that would come from economic hope.  If you can afford to take that risk, floating can pay off big this week.  If you'd rather leave well enough alone, lock. 

As far as locking today, we've had such a volatile morning, there's no sure bet.  So the only safe bet is to lock.  Any unexpected news could send the market one way or the other.  Stay tuned to stocks and this blog for indications of a significant movement.