Thursday 9/25 ... MBS' Open Strong on Weak Economic Reports ...

Today brought us the release of a couple economic reports that have helped MBS to open strong, that is good news for rates. First, we had the release of the weekly jobless claims. Economists where expecting 450,000 but the number came is much worse at 493,000. Also, the report showed continuing claims are back up to a 3.5 million. These numbers are good news for mortgage rates. How so, with higher amount of people unemployed, companies can attract new labor at a lower cost, hence wage based inflation is under control. If unemployment numbers are low, companies must attract new labor with higher pay, causing wage based inflation. And stated before, our mortal enemy is inflation. Bottome line, this is helping push mbs up in price thus lowering yield which leads to better rates on mortgages. The next key report was the durable goods order. This report shows if companies are increasing the buying of equipment which helps to expand their growth. Economist's where expecting a drop in orders by -1.6%; however, the number came in much worse at a drop of -4.5%. This is also good news for us as this is a bad sign of economic growth which helps lead to lower rates. A part of the durable goods report is factory orders which are at the worst levels since 1997.

Before we get all excited, lets remember the big news story of the week, the government rescue plan. Until this is either passed or killed, we will probably not see a big move up in mbs pricing. Investors are still unsure of what is going to happen so they are placing alot of money on the sidelines. MBS are up today by about .25 in discount but hit a ceiling and are having a difficult time breaking through. We have strong support beneath us, and appears that we will stay in a trading range, so floating seems like a safe call. But check back and we will let you know if the market starts to move either way.