Market Update - From Orange County Loan Officer

Economic Data:

EUR / USD  1.3761  Down  0.0005
USD / JPY  90.515  Up        0.2078
GBP / USD  1.5340  Up       0.0098

OIL      82.44     Up  0.74
Gold  1,125.60  Up  3.10

Key Economic News:

Following the weekly mortgage applications report just released, we have PPI, testimony on bank regulation and monetary policy, and a Fed speach...

The Mortgage Bankers Association's index of mortgage applications edged down 1.9% in the week of March 12, with purchase loan applications don 2.3%. Although this followed two weeks of gains cumulating to 15%, the index remains in depressed territory.

8:30: Producer price index for Feb...energy eases, core benign. An easing in energy prices should pull the headline index down. Excluding food and energy we expect no change.
On headline, median forecast of (70): -0.2%, ranging from -0.6% to +0.5%; last +1.4%.
On core, median forecast (of 68): +0.1%, ranging from -0.2% tp +0.3%; last +0.3%.

14:00: Federal Reserve Chairman Ben Bernanke and former Chairman Paul Volcker testify on "Examining the link between Fed bank supervision and monetary policy"... This may sound like a mid afternoon snoozer, but it is an important issue for the Fed, as it has historically argued (intermittently for at least three decades) that bank supervision is a critical component for the proper execution of monetary policy.

16:30: Dallas Fed President Richard Fisher speaks on "Learning from each other in crisis response"...In this context "each other" means the Fed. on Fisher's side, and the IMF, the European Commission, and the Bank of England, on the part of other panelists. The panel is part of a conference sponsored by the Dallas Fed and the European Commission.

Advice:

Benign report for finished goods
A benign report for prices of finished goods, with gasoline prices pulling headline down more than expected. Core price index for intermediate (partly processed) goods rises sharply; however, in recent years this has meant little for finished goods.

Key Numbers:
PPI -0.6% in Feb (mom, +4.4% yoy) vs. median forecast -0.2%.
Ex food and energy +0.1% (mom, +1.0% yoy) vs. median forecast +0.1%.

I believe the market will improve today.

My position on MBS changes to short today.

by: Neil Trenerry