What a week we have had with the release of the anticipated stimulus plan and the announcement of a mortgage mitigation program to help people who owe more than 20% of their home or who are unable to keep making their payments. The full details are yet to be disclosed, but this will no doubt help to stabilize home prices, to slow foreclosure filings, and to keep people in their homes.
Mortgage Bonds are trading lower this morning, despite the above news, as they battle against two very tough layers of resistance at the 25 and 50 day moving averages. The Producer Price Index (PPI) came in much higher than expected, which is helping to weigh on mortgage backed securities. Also in the news, Initial Jobless Claims came in slightly higher this morning with a rise of 627,000, bringing the total Continuing Claims to a shocking 5,000,000. At this point the markets are pretty much used to these dismal numbers, and the report was basically ignored.
In addition, the Philidelphia Fed Index came in quite a bit worse than the expected -25.0, with a reading of -41.0. Surprisingly, Mortgage Backed Securities had little reaction to this otherwise bond friendly report.
With mortgage bonds battling a heavy layer of resistance above, we are taking a locking stance to protect the gains we saw last week. Should mortgage backed securities find some footing, we could see prices reverse direction. Should anything change, we will keep you posted. Hang in there, these are historic times.
