US economy expanded at a 1.7%

Change since pricing In discount points In 32's Decimal  30 Year Conv (FNMA MBS)  3.375%-3.75% Unchanged 0 0  3.875%-4.25% Unchanged 1 0.03125  4.375%-4.75% Unchanged 3 0.09375  30 Year FHA/VA (GNMA MBS)  3.375%-3.75% Worse by 1/8 -1 -0.03125  3.875%-4.25% Unchanged 1 0.03125  4.375%-4.75% Unchanged 1 0.03125  15 Year Conventional  2.875%-3.25% Worse by 1/8 -3 -0.09375  3.375%-3.75% Worse by 1/8 -1 -0.03125  3.875%-4.25% Worse by 1/8 -2 -0.0625  15 Year FHA/VA  2.875%-3.25% Worse by 1/8 -3 -0.09375  3.375%-3.75% Worse by 1/8 -1 -0.03125  3.875%-4.25% Worse by 1/8 -2 -0.0625  7/23 Conventional Worse by 1/8 -2 -0.0625  5/25 Conventional Unchanged 0 0

	Instrument Current Yield Change  10 Year Treasury 1.65% -3  30 Year Treasury 2.76% -7  NASDAQ 3077 Closed  Ginnie Mae 3.5% 107.83 1  Fannie Mae 3.5% 105.67 2

Commentary & News:
Open

Mortgage bond prices opened slightly lower Wednesday morning applying upward pressure to mortgage rates.

In news released this morning, the US economy expanded at a 1.7% rate in the second quarter. That data was near expectations and had little effect on trade.

Traders are now waiting for stocks to begin trade at 9:30 am ET to help gauge interest rate direction. This afternoon the Treasury will auction $35B of 5-year notes with results by 1:15 pm ET and the Fed Beige book will be released at 2:00 pm ET.

In overnight trade, European Central Bank President Mario Draghi wrote an op-ed piece in a German publication saying exceptional measures are sometimes needed to carry out the mandate of stable prices. This is his second big “splash” this week. On Monday he announced he would skip the Jackson Hole Symposium this weekend due to his workload. It appears Europe may be coming to grips with the debt crisis. We hope it is not too late.

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Mortgage bond prices opened near unchanged

	Instrument Current Yield Change  10 Year Treasury 1.64% 5  30 Year Treasury 2.75% 8  DOW Jones 13118 -6  NASDAQ 3075 2  Ginnie Mae 3.5% 107.8 1  Fannie Mae 3.5% 105.64 3

Commentary & News:
Open

Mortgage bond prices opened near unchanged Tuesday morning holding mortgage interest rates steady from pricing Monday.

Traders are waiting for stocks to begin trade at 9:30 am ET and for the release of consumer confidence set for 10:00 am ET. This afternoon the Treasury will auction $35B of 2-year notes with results by 1:15 pm ET.

This Friday Federal Reserve Chairman Bernanke will speak at the Jackson Hole Symposium. The event is designed as a forum for central bankers, policy experts and academics to come together to focus on topics that are not necessarily of immediate concern, but instead looks into the future at emerging issues and trends. Last night European Central Bank President Mario Draghi announced he will skip the meeting due to his work load. That announcement has some wondering if Europe is really crafting a plan to save the Euro. Market participants are hopeful Mr. Bernanke will lay the groundwork for further easing from the Fed. If the Fed is going to provide more stimulus to the economy it will most likely come from the Fed meeting in September, not this venue.

hinese industrial corporate profits saw their biggest declines of 2012

Mortgage bond prices opened slightly higher Monday morning erasing some of the losses seen Friday afternoon.

There is no economic news set for release today. Traders are waiting for stocks to begin trade at 9:30 am ET to help gauge interest rate direction. Dow futures indicate a flat opening for equities.

In overnight trade, Chinese industrial corporate profits saw their biggest declines of 2012 and German Info Business Climate showed confidence declined for a fourth month in a row. The weak data has market participants hoping for more central bank easing.

This week has three auctions and some important economic releases including GDP second estimate, Fed Beige Book, weekly jobless claims, income and outlays. This is the last week of summer vacation. We expect to see trade slow to a crawl as the week progress

Mortgage bonds opened near unchanged

Mortgage bonds opened near unchanged this morning holding rates steady after the big runup in price yesterday. The data this morning was rate friendly but the initial reaction was muted.

Weekly jobless claims @ 372k, expected @ 365k, rate friendly.

Yesterday afternoon's Fed minutes indicated:
Further easing likely soon
US economic risk toward downside due to euro zone strains
Some members advocate a large scale asset purchase program to boost recovery

Data from the euro zone indicated business activity decreased, even in Germany. It appears the euro zone is headed back into recession.

Mortgage bonds added to the small gains from yesterday

Mortgage bonds added to the small gains from yesterday following reports of economic slowdown abroad.

Japanese trade data was weaker than expected. In addition, stock futures point to more weakness. The DOW closed down 68 points yesterday.

News out of the euro zone focused on a possible Greek exit. This talk has gone on for some time but the talk continues.

We have a light data week but the Fed minutes this afternoon often cause some volatility so caution is key. Exisiting home sales data will be released @ 10am et but usually doesn't move the market much.

To demonstrate how uncertain and unstable the euro zone is, here are two world reports with totally different takes, reported within hours of each other:

The brightest minds and richest investors are scrambling to end up on the right side of that debate. Fortunately, "uncertainty" is good for U.S. debt, unfortunately improvements can be erased as quickly as they come as we have seen the past few weeks. In this environment it is smart to take advantage of improvements when they come your way! 

The market is Worse by 1/8 since Monday 's ratesheet

Mortgage bonds closed opened weaker this morning pushing rates higher.

There was no data this morning. News out of the euro zone dictated trading. Spain had successful 10Y auction where they saw their yields fall from 6.33% last night to 6.231% this morning. Newswires dominated by talk that the ECB will implement a bond buying scheme to drive euro zone debt yields lower. This would reverse the flight to quality buying of U.S. debt instruments as we continue to experience. The inverse of what helped our rates hit record lows is now pressuring our rates higher.


We have a light data week but the Fed minutes this afternoon often cause some volatility so caution is key.

Mortgage bonds opened slightly weaker this morning

Mortgage bonds opened slightly weaker this morning eating away some of the small gains from Friday afternoon.

There was no data this morning. We initially looked to open considerably weaker as reports from the euro zone indicated the European Central Bank would buy member nation debt to help keep borrowing costs in check. However, the ECB downplayed those initial reports and the seesaw volatility resumed.

We have a light data week but the Fed minutes Tuesday often cause some volatility so caution is key.

Mortgage Rates Unchanged

Mortgage bond prices opened slightly positive on the day but not enough to erase the significant losses from yesterday afternoon. Rates remain worse since pricing Wednesday morning.

In new, housing starts came in @ 746k, expected @ 757k. This data was generally rate friendly. Weekly jobless claims @ 366k, expected 365k, relatively in line and didn't move things much.

News out of the euro zone was mixed. Overall growth continued to contract while Germany remained the one bright spot with steady growth.

British retail sales showed a somewhat surprise uptick, but much is being attributed to the Olympics and future projections look for that figure to fall back down.

We have Philadelphia Fed, LEI, and consumer sentiment data Friday morning.

look to open negative adding to recent negative trend

Mortgage bond prices remained weaker throughout the day adding to the losses from yesterday afternoon.

The U.S. bond market was generally weaker heading into the data as news out of the euro zone was not U.S. rate friendly. France and Germany both saw higher than expected GDP figures. While the rest of the euro zone showed decreases, those decreases were expected.

The news this morning added fuel to the already negative fire. Retail sales rose 0.8%, considerably higher than the expected 0.3% increase. The producer price index was higher than expected. PPI rose 0.3%, expected up 0.2%. The core, which excludes volatile food and energy rose 0.4%, expected up 0.2%... not rate friendly! The last thing we need is to see inflation fears ignited. Inflation, real or perceived is the enemy of fixed income securities and causes prices to fall and rates to rise.

Tomorrow we have consumer price index, industrial production, and capacity use data.

Expect more volatility

Mortgage bond prices opened slightly weaker this morning adding to the losses from Friday afternoon.

There is no data today but this week brings some important releases with retail sales and inflation data toward the front portion of the week.

News out of the euro zone was not as bad as typical. Greece economic growth declined 6.2% but beat estimates of a 6.6% decline. This isn't exactly good for Greece but in the short term gives some hope.

Stock futures are slightly weaker while oil prices are slightly higher this morning. Expect more volatility from both.

Up Down up Down

Mortgage bond prices opened better adding to the gains from yesterday afternoon.

News around the globe showed continued economic weakness. Indications that Chinese exports are weakening reignited those concerns and sent some flight to quality buying into U.S. debts including mortgage bonds.

News out of the euro zone indicated France continues to struggle. The Bank of France indicated the economy is likely headed for recession. Just another indication of how troubling things are in Europe.

There is no data today but hopefully this positive rebound will continue so we recover the losses seen earlier this week.

This morning represents a forward drop for MBS traders. The front month for delivery has rolled to SEPTEMBER. This is a technical aspect of the bond market and has no real impact on daily rates. Secondary managers have been pricing into the SEPTcoupon for some time. What is most noticeable is the drop in bond prices as forward months fall approximately 8/32s to 10/32s.

Mortgaeg Rates on the Rise

Mortgage bond prices opened slightly weaker this morning adding to the losses from yesterday afternoon following mixed data.

The trade deficit came in at $42.92b, expected $47.5b. A falling deficit usually strengthens the value of the dollar and can help rates. The short term reaction was muted as the weekly jobless claims data overshadowed the release.

Weekly jobless claims came in @361k, expected 370k, not rate friendly.

In new from the euro zone, one of the founding fathers of the euro, Otmar Issing, a former European Central Bank chief economist, said that some countries may be forced to leave the currency to save the euro and strengthen Europe. So far we have had little traction on the report but expect continued volatility on this front.

We have a 30Y Treasury auction this afternoon that is likely to factor into trading.

The market is Unchanged since Tuesday 's ratesheet

Mortgage bond prices opened positive helping reverse the recent negative trend and helping rates improve a little.

Preliminary Q2 productivity up 1.6%, expected up 1.3%. The initial reaction was muted as U.S. debts looked to open positive even before the release.

News out of the euro zone continue to show trouble. The S&P downgraded the Greek credit rating, cutting the outlook from stable to negative. Not a huge shocker but counters other news articles claiming things are stabilizing for the euro zone. Spain continues to show weakness with industrial output continuing to fall. The only bright spot remains Germany which saw solid demand for their 10 year debt.

Mortgage bond prices remain weaker this morning pushing mortgage interest rates higher

Mortgage bond prices remain weaker this morning pushing mortgage interest rates higher. The data out of the euro zone was generally U.S. debt friendly but unfortunately we cannot get any traction from the news and the supply(Treasury auctions) heading our way this week are weighing heavily on U.S. debt instruments.

A manufacturing report out of Germany was weaker than expected but the initial short term reaction did not reverse the negative sentiment this morning for mortgage backed securities. The euro zone troubles are far from over and we should expect more volatility.

There was no data released this morning. We have a 3Y Treasury auction this afternoon.

Mortgage bond prices remain near the levels where daily pricing was set holding rates steady.

There was no data released this morning.

News out of the euro zone has driven trade for some time with flight to quality buying of U.S. debt helping keep mortgage interest rates low. All is quiet this morning with only minor political stories hitting the wires. A German foreign minister warned all parties to tone down the "very dangerous" rhetoric. "The tone is very dangerous. We must take care not to talk Europe down," Westerwelle said in a statement. He added, "We need a strengthening, not a weakening of democratic legitimation in Europe." So not only does the euro zone face disaster, the ruling powers are so fragmented it is difficult for them to even present a much-needed unified front to tackle the very difficult problems ahead. This is far from over and continued volatility is to be expected

Rates are under pressure

Mortgage bond prices opened lower applying upward pressure to mortgage rates. Rates are under pressure following stronger than expected jobs data.

In news released at the open, non-farm payrolls rose 163K and the unemployment stood at 8.3%. Expectations were for the US economy to add 100K new jobs and the unemployment rate to stand at 8.2%. The stronger read on the non-farm payrolls number may well give Ben Bernanke cause to pause.

Traders are now waiting for stocks to begin trade at 9:30 am ET.

Mortgage bond prices are currently extremely volatile

Mortgage bond prices are currently extremely volatile with swings of 4/32 common. The volatility comes as traders digest comments from ECB head Draghi.


In news released this morning, weekly jobless claims printed at 365K and continuing claims, a summation of all receiving benefits, at 3,272K. That data was near expectations.

In Europe, the ECB held rates unchanged with chairman Draghi speaking when the financial markets opened in the US. From the comments we have seen, it appears as if he is setting up fight between the ECB/Euro Zone and Germany. Germany opposes the outright purchase of debt from the PIGS of the euro. This is going to be very interesting to see how it plays out.

Stocks open at 9:30 am ET and factory orders data will be released at 10:00 am ET.

ADP payroll processing report indicated the US economy added 163K

Mortgage bond prices opened lower Wednesday morning erasing the small gains seen Tuesday afternoon. Rates are under mild pressure from positive stock futures, an indication the Dow will open higher.

In news released this morning, the ADP payroll processing report indicated the US economy added 163K jobs last month. Economists’ estimates were for an increase of 125K jobs. This is the first of three employment reports this week. Tomorrow brings weekly jobless claims and Friday we will see the Bureau of Labor Statistics monthly employment report.

Traders are now waiting for stocks to begin trade at 9:30 am ET and for the release of ISM data set for 10:00 am ET.

The Federal Reserve concludes a two-day meeting today and will announce any changes to monetary policy at 2:15 pm ET. Global expectations are running high for central banks in Europe, Asia and the US to provide more stimulus to promote growth. Ben Bernanke and the Fed have four options ranging from doing nothing, continuing to lay the groundwork for more easing, extend promise to keep rates low to a full blown QE3. Be ready for a volatile afternoon. Given the fact that the ECB meets tomorrow, ADP came in better than expected and the monthly jobs report is set for Friday we would not be surprised to see little from the Fed this afternoon.