3-20 the climate of mortgage

Mortgage Bonds are trading slightly lower and already off the best levels seen

earlier today. The bond market will be closing early today at 2:00pm ET and will

also be closed on Friday.

Initial Jobless Claims were reported at an almost alarming 378,000, higher than

expectations of 360,000 and at levels that suggest recession. The more closely

watched four-week moving average rose to 365,250. A reading above 362,000

also suggests the economy is in a recession.

The Philadelphia Fed Manufacturing Index for March was reported at -17.4,

which was still lousy, but slightly better than expectations of -18.0. The Index of

Leading Economic Indicators (LEI) for February was reported at - 0.3%, which

was also met expectations. Stock players were happy to get past this mornings

data without a crisis report, and since have moved higher. The move up in

stocks is taking some money out of the Bond market.

Speaking of stocks - our Forecast for 2008 included just one stock pick FXP,

which is a double short on a basket of Chinese stocks. We mentioned it at $76

and it is presently trading at $122. That is a pretty good return...61%...in two

months, especially in a down stock market.

Technically, Mortgage Bonds are trading just below a tough, dual layer of

overhead resistance located at $101.69 and $101.81. Prices have not traded

consistently above this ceiling in over three years, so the Bond has some

headwind to contend with if prices are to continue to move higher. With tough

overhead resistance and Stocks moving higher, we think a bias towards locking

is prudent.