MBS MID-DAY: Rallying a Bit

Even though the S&P is currently trading since September 2008, 10yr note yields are continuing to grind around their best levels of the day, currently 3.348. FNCL 4.5's are up 3 ticks on the day at 102-12 and have been holding that level as support since 9am. There are no major cues for reprices in either direction at the moment.

After Consumer Confidence came in slightly better than expected, the first moves were slightly to the downside for MBS and TSYs. FNCL 4.5's only made it a tick lower though, and currently sit at 102-13 in FNCL 4.5's. 10yr note yields are 1.5 bps lower on the day at 3.3478. There is no other scheduled economic data for the day but we will get 2yr note auction results at 1pm.

* US APRIL CONSUMER CONFIDENCE INDEX 65.4 VS MARCH REVISED 63.8 (PREVIOUS 63.4) - CONFERENCE BOARD * US CONSUMER CONFIDENCE INDEX MEDIAN FORECAST FROM REUTERS FOR APRIL WAS 64.5 * US CONSUMER PRESENT SITUATION INDEX IN ARPIL 39.6 VS MARCH REVISED 37.5 (PREVIOUS 36.9) * US CONSUMER EXPECTATIONS INDEX 82.6 IN APRIL VS MARCH REVISED 81.3 (PREVIOUS 81.1) - CONFERENCE BOARD * US JOBS HARD-TO-GET INDEX 41.8 IN APRIL VS MARCH REVISED 44.4 (PREVIOUS 44.6) - CONFERENCE BOARD * US 1-YEAR CONSUMER INFLATION RATE EXPECTATIONS 6.3 PCT IN APRIL VS MARCH 6.7 PCT * US CONSUMER PRESENT SITUATION INDEX AT HIGHEST SINCE NOVEMBER 2008 * US JOBS HARD-TO-GET INDEX AT LOWEST SINCE JANUARY 2009 - CONFERENCE BOARD

FNCL 4.5's had ticked down to 102-09 at their worst this morning. You can note on a 2 day chart that this was in line with yesterday's support (floor) into the afternoon. 10yr notes similarly bounced off their highest yield of yesterday afternoon, around 3.37. Both markets are much improved since then with FNCL 4.5's up 4 ticks on the day at 102-13 and 10yr notes 1.33 bps lower on the day at 3.3497. The most important economic report of the morning, Consumer Confidence, will arrive in just under 40 minutes.

* US FEB HOME PRICES IN 20 METRO AREAS -0.2 PCT SEASONALLY ADJ (CONSENSUS -0.3) VS JAN -0.3- S&P/CASE-SHILLER * US FEB 20-METRO AREA HOME PRICES -1.1 PCT (CONSENSUS -1.0) VS JAN -1.1 PCT-S&P/CASE-SHILLER * US FEB 20-METRO AREA HOME PRICES -3.3 PCT (CONSENSUS -3.3 PCT) FROM YEAR AGO -- CASE-SHILLER * US FEB HOME PRICES IN 10 METRO AREAS -0.2 PCT SEASONALLY ADJUSTED VS JAN REVISED -0.3 PCT - CASE-SHILLER * US HOME PRICES IN 10 METRO AREAS -1.1 PCT IN FEBRUARY VS REVISED -1.0 PCT IN JAN - S&P/CASE-SHILLER * US FEB HOME PRICES IN 10 METROPOLITAN AREAS -2.6 PCT FROM YEAR AGO - S&P/CASE-SHILLER * US FEB 10-CITY, 20-CITY HOME PRICE INDEXES DOWN FOR EIGHTH MONTH BUT HOLD ABOVE 2009 LOWS - S&P/CASE-SHILLER

The Federal Housing Finance Agency today reported that the National Average Contract Mortgage Rate for the Purchase of Previously Occupied Homes by Combined Lenders, used as an index in some ARM contracts, was 4.84 percent based on loans closed in March. This is an increase of 0.05 percent from the previous month. The average interest rate on conventional, 30-year, fixed-rate mortgage loans of $417,000 or less increased 9 basis points to 5.06 percent in March. These rates are calculated from the FHFA’s Monthly Interest Rate Survey of purchase-money mortgages. These results reflect loans closed during the March 25-31 period. Typically, the interest rate is determined 30 to 45 days before the loan is closed. Thus, the reported rates depict market conditions prevailing in mid- to late-February. The contract rate on the composite of all mortgage loans (fixed- and adjustable-rate) was 4.84 percent in March, up 4 basis points from 4.80 percent in February. The effective interest rate, which reflects the amortization of initial fees and charges, was 4.98 percent in March, up 6 basis points from 4.92 percent in February. This report contains no data on adjustable-rate mortgages due to insufficient sample size. Initial fees and charges were 0.95 percent of the loan balance in March, up 0.15 percent from 0.80 in February. Twenty-five percent of the purchase-money mortgage loans originated in March were "no-point" mortgages, down from 30 percent in February. The average term was 27.6 years in March, up 0.4 years from 27.2 years in February. The average loan-to-price ratio in March was 75.5 percent, up 0.8 percent from 74.7 percent in February. The average loan amount was $208,600 in March, down $8,300 from $216,900 in February.

* - FREDDIE MAC ISSUES MONTHLY VOLUME SUMMARY FOR MARCH 2011 * - FREDDIE MAC SAYS TOTAL MORTGAGE PORTFOLIO DECREASED AT AN ANNUALIZED RATE OF 4.7% IN MARCH. * FREDDIE MAC SAYS SINGLE-FAMILY REFINANCE-LOAN PURCHASE AND GUARANTEE VOLUME WAS $19.4 BILLION IN MARCH * FREDDIE MAC - MORTGAGE-RELATED SECURITIES AND OTHER GUARANTEE COMMITMENTS DECREASED AT AN ANNUALIZED RATE OF 5.3% IN MARCH * FREDDIE MAC - TOTAL NUMBER OF LOAN MODIFICATIONS WERE 12,141 IN MARCH 2011 * FREDDIE MAC SAYS SINGLE-FAMILY SERIOUSLY DELINQUENT RATE DECREASED TO 3.63% IN MARCH * FREDDIE MAC - MULTIFAMILY DELINQUENCY RATE REMAINED FLAT AT 0.36% IN MARCH

Mortgages are opening slightly weaker in price and wider in yield spread vs. 5pm marks. The FNCL 4.5 MBS coupon is -1/32 at 102-09 and the secondary market current coupon is .005% higher at 4.108%. if these indications hold loan pricing should be unchanged or slightly better as lenders left about 12bps on the table yesterday afternoon after MBS prices rose 4/32 from morning levels.