Mortgage Market Commentary 3.20.09

Mortgage backed securities (MBS) prices are near unchanged in quiet trading with no economic data released today; FNMA 4.5% coupon 102.11bps, -3bps. The U.S. will sell a record $94 billion of notes next week as it seeks to fund spending aimed at reviving economic growth. Fed's recently purchased $28 billion MBS, mainly 4.0% & 4.5% coupons, and sold $8 billion of mostly 5.5% & 6.0% coupons in its campaign to lower U.S. home loan rates. With the target rate at 0%, the use of monetary inflation as a policy tool raises the risk price inflation may take off before policy makers can reverse the process. Inflation risk is sweeping commodity prices higher on speculation the Fed's measures will revive the economy; oil traded above $50 a barrel and closed at a 3 month high. Fed Chief Bernanke speaks at 9am pt, always a potential market moving event. TGIF!