Mortgage Backed Securities are again underwater this morning, as traders await the much anticipated Fed Biege Book that is set for release at 12:15 MST. We saw a nice run higher yesterday, but much of those gains have already been erased this morning.
Commodity prices have been slowly rising recently, which has increased hopes that economic activity will improve. With much of the recent economic coming in slightly in the positive, this signals that our recover is no doubt emminent. Of course, this is further weighing on the mortgage bond market.
Currently, the FNMA 5.0% coupon is trading at -78 bps, but this included the bond rollover. Mortgage Backed Securities are sitting right on an important layer of support right now, wich we hope can hold. The release of the Biege Book will help to determine whether we have established a new trading channel or if there is still more room for deterioration. We will be keeping a close eye on this, and we will let you know if anything major develops.
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