FN 5.5 MBS unchanged at 99-28. Resistance level 100-03 still in effect

The benchmark 5.5 FN MBS closed up 3/32 at 99-28 yesterday. Before the PPI reading the FN 5.5 was unchanged from going out levels.

A record pace of falling energy prices helped the Producer Price Index fall by 2.8 percent in October . Year over year the prices producers pay for goods and capital has increased 5.2%. Although core inflation did rise 0.4 percent, as consumer's and producer's demand for goods decreases and thoughts of wage inflation diminish, concerns of deflation will mount and the core inflation number will be expected to decline right along with the falling headline inflation number.

As we expected this data was not much of an MBS mover, the FN 5.5 is still unchanged at 99-28. 

Treasury International Capital is due out at 9AM. This Treasury data tracks the demand for US Treasury securities, agency securities, corporate bonds, and corporate equities. Strong foreign demand for US securities helps provide downward pressure on US interest rates and also supports the value of the US dollar.

Bernanke and Paulson will give lawmakers a TARP update on Capitol Hill this morning. A bailout of the Auto makers will also be widely discussed and closely watched on Wall Street as the health of the job industry is now quite dependant on auto makers staying in business.