Last Week's MBS Recap

Last week MBS gained +61 basis points from last Friday's close which caused 30 year fixed rates to move lower for the week.  The benchmark FNMA 3.5 November MBS had one major movement during the week which was almost solely responsible for rates decreasing.  This was due to Tuesday's Non-Farm Payroll release.  Last week saw rates improve an average of .125% on Tuesday off news that the Non-Farm Payroll report came in much lower than anticipated.  This pushed MBS out of the previous trading range and pierced through the Resistance Level of 102.00 (which is now a new Support Level) and into a new trading channel.  Through the rest of the week MBS remained flat, with almost no change to rates or rebate pricing.    

The market was expecting around 180K new jobs, but the reading came in much lower at 148K.  Many economists think that we need at least 150K new jobs each month to see any measurable economic growth.  Bonds generally do better in low or negative economic growth, so this reading was positive for bonds and therefore mortgage rates.  Traders also viewed this data as a signal that the Federal Reserve would have to keep their monthly $85 billion Treasury and MBS purchases in place until at least the 2nd quarter of 2014 which will keep rates at low levels for an extended period of time.

Friday saw the MBS market end the day with an improvement of 14 basis points, which means that interest rates as well as pricing rebate should remain about the same.  It was the third day in a row that we saw MBS end the day flat. 

- Michael Corboy
www.specialtyfinancialmtg.com