Morning Mortgage Rate Coffee Update-02/12/2009

02/12/2010

1. What happened yesterday?
2. What is on the agenda for today?


1. What happened yesterday? We gained +6BPS from Wednesday's close.  The following economic reports were released:

Date    ET    Release    For    Actual    Consensus    Prior    Revised From
11-Feb    8:30    Initial Claims    6-Feb    440K    465k    483k    480K
11-Feb    8:30    Continuing Claims    30-Jan    4538K    4600k    4617k    4602K
Initial Claims finally cracked the 450K mark.  They came in at 440K, much better than the consensus estimates and 43K lower than the prior period.  And both Continuing Claims and the closely watched 4 week moving average were down.

We had a 30 year Treasury auction.  We sold $18 billion at a high yield of 4.72% and a bid-to-cover ratio of 2.36.  This was a little worse than our previous 30 year auctions and also was bearish for MBS pricing.

The Federal Reserve Bank of New York released their weekly Agency MBS purchases.  At $11 billion net, it is the lowest weekly purchase of MBS by the Fed which is to be expected since their money will run out next month.

We would have normally been hammered with MBS pricing yesterday with the Initial Claims data and the weak 30 year Treasury auction.  But we found a friend in our 200 day moving average.  This has been tested for three straight days and has held up nicely..giving purchasers confidence that there is strong support there which in turn spurs purchase activity and helps our pricing.

2. What is on the agenda for today: The following economic reports will be released:
Date    ET    Release    For    Actual    Consensus    Prior    Revised From
12-Feb    8:30    Retail Sales    Jan    0.50%    0.30%    -0.10%    -0.30%
12-Feb    8:30    Retail Sales ex-auto    Jan    0.60%    0.50%    -0.20%    
12-Feb    9:55    Mich Sentiment    Feb                 75.00    74.4    
12-Feb    10:00    Business Inventories    Dec        0.20%    0.40%    
12-Feb    11:00    Crude Inventories    5-Feb        NA    2.32M    
Core Retail Sales were slightly ahead of estimates but the market is shrugging it off considering that the retail sales are sure to take a dip as a result of the massive snow storms in the East.

Consumer Sentiment could be a market mover if it bucks its recent trends and turns downward. The MBS market is closed on Monday in observance of President's Day.  This will be the last trading day before a long weekend.  Generally, we have fared well as investors "park" their funds into Treasuries and MBS over a long weekend.  There is no gaurantee that this will occur today but it something to keep an eye on late in the day.
 
Pre-Market Status: Neutral and Floating slightly as long as we trade above our 200 day moving average. The top of our channel is +12BPS from our early open...so that is your potential upside.