Yesterday the markets saw the MBS market end the day with an improvement of 45 basis points, meaning that both rates and rebate pricing should improve.  However, depending on your lender, you may have experienced interest rate reprices because of the volatility that we had during the day, so you may have seen some of those improvements yesterday rather than with today's pricing.  Floating an interest rate is okay to do as long as you are working closely with your Mortgage Loan Professional and heeding their advice.  Be ready to act quickly if the MBS market starts to cool off, as we approach the technical Resistance level of 102.00. 

As anticipated, we saw Washington D.C. avert a crisis at the last minute as they have agreed to both temporarily fund the government and raise the debt ceiling.  This is good news to traders, and is helping both stocks and bonds to perform well.  Expect to see improvements to mortgage rates between yesterday's and this morning's gains to the MBS (Mortgage Backed Securities) market.  Rate improvement is an average of .125%, but may vary from lender to lender.  If mortgage rates haven't yet improved with your lender, rebate pricing will.

The question now is how long this will last.  It's a good idea to float for now, but be ready for when the market starts to cool off.  Be sure to stay alert and work closely with your Most Trusted Mortgage Loan Professional to stay ahead of lender reprices for the worse in case of negative MBS (Mortgage Backed Securities) performance.  Also, watch closely as we approach the technical Resistance level of 102.00 on MBS. 

We officially have a deal. The President has ordered furloughed employees back to work and the government will now remain open until January 15th and the deb ceiling will not be reached again until February 7th. So, as you can see...we have a very temporary solution that has a very high probability of increased political turmoil at the beginning of the year.

The Senate approved the legislation by an 81-18 vote; the House followed suit by a tally of 285-144, with 87, Republicans in favor and 144 against, breaking an informal rule in which a majority of the majority party is supposed to carry legislation. Democrats unanimously supported the bill, even though it locks in funding at levels required by across-the-board spending cuts known as sequestration.

We were supposed to get Building Permits and Housing Starts this morning but that department is not up and running yet.

We did get Weekly Initial Jobless Claims: 358K vs est of 335K, approximately 70K was due to the govt shut-down. This reading is generally favorable for bonds.

 MBS are up +41 BPS in early trading. About +30BPS of that is a continuation from yesterday's relief rally and about +12BPS is due to the weaker than expected Initial Jobless Claims data. While the markets are happy that we have avoided a default, this temporary extension is widely believed to lead to continued government dysfunction. As a result, bond traders that had been expecting a tapering of MBS and Treasury purchases by the Fed in 2013 are now pricing in no taper until at the very earliest March of 2014 and this is providing a nice lift to bonds across the board.

- Michael Corboy

www.specialtyfinancialmtg.com