This week we will be presented with a slew of economic news, as well as continued fourth quarter earnings reports. These come off the heals of last Friday’s Gross Domestic Product report showing that our economy is in its steepest slowdown in 50 or more years.
The Personal Consumption Expenditure Index came in flat for January at a reading of 0%. This brings the year over year reading to 1.7%, which is right within the Fed’s target of 1% to 2 % and indicates that inflation is not a real concern presently. Also reported this morning, Personal Income dipped -.2%. In relation, Personal Spending slid further for the 6th month by 1%, and the individual savings rate increased to 3.6% of after tax wages as consumers prepare for the tough times undoubtedly ahead.
With mortgage backed securities falling below a firm layer of support at 101.00, there is room for more deterioration in pricing. Over the last two weeks the bond market has lost close to 150 bps, as mortgage backed securities traded in wide, volatile ranges. We are hopeful,though, that the market can gain back some of these losses, though we will need to see mortgage backed securities move higher with some real conviction for us to see improvements in pricing and rates.
