MBS OPEN: HAPPY ST.PATRICK'S DAY

HAPPY ST.PATRICK'S DAY!!!

Mortgages once again were insulated from the exploratory musings of equity markets yesterday. While TSYs sold off and stocks wandered (and wondered) the MBS stack traded in a tight range. MBS spreads vs. TSYs were several ticks (32nds) tighter as relatively cheaper MBS prices brought about real money buyers.  The Federal Reserve remains the ever present source of liquidity for current coupon/production MBS. Production MBS = the loans you write. Trading volume in the MBS market was a bit below average and supply from mortgage bankers was relatively light. Yesterday began the Class C settlement process which means we start watching April GN coupons today.

Remember "Up in coupon" trading strategies bring about profit taking in fuller coupons (5.5s and 6.0s at the moment) while the Federal Reserve is left to provide support for "rate sheet influencing" MBS production coupons.  This can often render your rate sheets helpless against reprices for the worse. Fortunately we have not been subjected to any day ruining reprices for the worst in the past few sessions. I do however think it is important not to lose sight of this reality....

At the open MBS is....pretty flat

APRIL FN30______________________________

FN 4.0 -------->>>> -0-01 to 98-31 from 99-00

FN 4.5 -------->>>> -0-01 to 101-00  from 101-01

FN 5.0 -------->>>> -0-01 to 102-08 from 102-09

FN 5.5 -------->>>> +0-00 to 102-31 from 102-31

FN 6.0 -------->>>> +0-00 to 103-18 from 103-18

APRIL GN30_____________________________

GN 4.0 -------->>>> -0-02 to 98-31  from 99-01

GN 4.5 -------->>>> -0-02 to 101-04  from 101-06

GN 5.0 -------->>>> -0-01 to 102-21 from 102-21

GN 5.5 -------->>>> +0-01 to 103-10 from 103-09

GN 6.0 -------->>>> -0-01 to 103-22 from 103-23

...and TSYs prices are moving higher (yields lower)

While you were sleeping global stock markets moved lower (except the Nikkei which was up 3.18%). US Stock Futures currently indicate a lower open.

Today begins the Federal Open Market Committee's two day meeting. The Federal Reserve is out of conventional monetary policy ammo at this point and should be further discussing the timing and implementation of market supportive strategies like purchasing Treasury Debt, improving TALF (and the verbiage of the contract), and the realm of continued Quantitative Easing efforts which we do not expect to conclude until at least 2010. In general markets go into hiding ahead of FOMC meetings so do not be surprised if light trading volume moves market indexes in a wider range.

830AM Econ Data  

Housing Starts

Jan: 0.56m

Feb: 0.466m

March Consensus Estimate: 0.45m

PPI

Dec Total :-1.9%  Dec Core: +0.2%

Jan Total: +0.8%   Jan Core: +0.4%

Feb Total Consensus Estimate: +0.4%  Feb Core Consensus Estimate: 0.1%