Mortgage Interest rates- Whats happened Last week

02/08/2010

1. What happened last week?
2. What is on the agenda for this week?
 

1. What happened last week?


We gained +44BPS last week.  For the most part, the economic that was released was very bearish (bad) for MBS pricing.  That included a strength in Unemployment, ISM, and more.  But instead of losing pricing (which is what should have happened) we actually gained pricing...why?

You can thank the "PIIGS" for that.  That's right the PIIGS!  PIIGS stands for Portugal, Italy, Ireland, Greece and Spain.  Their continues to be a tremendous amount of global concern of these sovereigns ability to repay their debt.  If one defaults, the likelihood is that it would lead to another of the group defaulting and that could lead to some severe stress to the global financial system.

So in affect, this concern is so strong that it is steam-rolling over any positive macro-economic data from the United States that would (and should) send MBS pricing lower. 

Pimco's Bill Gross stated on Friday that Agency MBS are overpriced by 40-50 BPS because of this.  For that reason, his company is not purchasing any MBS until the pricing moves into their correct levels.  This should tell you something as Pimco manages over one trillion in bonds.

2. What is on the agenda for this week:


We have a very light week for economic data.  We really only have major releases on Tuesday and Thursday.

We do have $81 billion in Treasury Auctions this week to absorb. Given the global concerns over the PIIGS, the auctions should be fairly well received. We have a 3 year on Tuesday, a 10 year on Wednesday, and a 30 year on Thursday.

Pre-Market Status: Neutral. Global concern is overshadowing the fundamentals right now.