MBS UPDATE: Choppy Flow

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Fn 4.0-> +0-03 to 101-04               Gn 4.0-> unchanged at 100-29+

Fn 4.5-> +0-04+  to 102-20            Gn 4.5-> +0-05 to 103-13+

Fn 5.0-> +0-04  to 103-12              Gn 5.0-> +0-04+ to 104-00+

Fn 5.5-> +0-01+ to 103-20+           Gn 5.5-> +0-00 to 104-06+

Fn 6.0-> +0-02 to 103-26+             Gn 6.0-> -0-00+ to 104-03+

Ben Bernanke and theFederal Reserve are in attendance as limited originator selling evens out  trade flows. Since reaching early intraday highs of 102-24+ the 4.5 has begun testing its supporting price levels. The FN 4.5 38% retrace has successfully held twice today so for now 102-17 will remain an intraday indicator of a momentum swing. The stack managed to withstand profit taking and originator selling yesterday, but only because of government support. Until further notice we do not expect these "roadblocks" to be trend changing events...just normal MBS market behavior that will be supported by a government bid (Fed, Treasury, GSEs).

So once again the MBS market is giving us "warm and fuzzies"  re: lower rates....but we all know the middle man is not cooperating ....the lenders.

Here is a note from one lender...

"Valued Customer,

Historically high volumes and rapidly fluctuating rates have challenged the capacity of our registration and lock system, LENDER'S NAME REMOVED. These conditions, coupled with the challenges normally seen with a new application, have led to irregular performance for some of our customers. We have identified the cause and are quickly working to implement changes and make corrections and upgrades. Regardless of these very demanding challenges and the rigorous work involved, we are very focused on our responsibility to you and your borrowers, and we are making significant progress to reduce any impact to you. The LENDERS NAME REMOVED technology team is fully engaged on the system performance, and we anticipate resolution over this weekend.

Again, thank you for your business and your relationship with LENDERS NAME REMOVED. We look forward to serving you and your borrowers in the new year. We appreciate your patience and will continue to update you on our progress and welcome your ongoing feedback."

SIGNED

LENDERS NAME REMOVED"

That said ..... "Freddie Mac (NYSE:FRE) today released the results of its Primary Mortgage Market Survey® (PMMS®) in which the 30-year fixed-rate mortgage (FRM) averaged 5.10 percent with an average 0.7 point for the week ending December 31, 2008, down from last week when it averaged 5.14 percent. Last year at this time, the 30-year FRM averaged 6.07 percent. The 30-year FRM has not been lower since Freddie Mac started the Primary Mortgage Market Survey in 1971."

So rates are still relatively low...but the FN 4.0 is trading over par so we are waiting for some MBS-Rate sheet tightening.