Mortgage Backed Securities (MBS) are up 25 bps thus far this morning, as we are hopefully seeing a bottom floor of support being established. After two weeks of losses a slight rebound should be expected, though even a significant jump will not get the market back up to the levels seen from March through May. Mortgage Rates have risen by upward of a point since “Black Wednesday” when the mortgage bond market started its crash.
As the economy recovers, it should be expected that rates will rise as inflation starts to become a real concern again. Also, with decent Yields in Treasuries, it makes little sense currently to purchase mortgage backed securities that are considered more risky. This combination has been what is truly effecting the market.
Wholesale Inventories were reported this morning at -1.4%, which is slightly worse than estimates but is still an improvement from previous months. The markets have had little reaction to this report, as most traders are awaiting a hefty round of Treasury auctions that will begin today. These could have a significant effect on mortgage backed securities, so we will be watching this closely.
With mortgage bonds attempting to establish a bottom, it is safe for now to float to see if you can get even a smidgen of your pricing back. Should anything change, we will keep you posted.
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