Volatile day.

MBS prices are down -11/32 (FNMA 30-yr 4.5 at 100.20), below the 9:45 et pricing level of -5/32. It was a very volatile session, and unfavorable repricing took place. The Jobless Claims data had little impact. Demand was about average for the 30-yr Treasury auction, and foreign investors purchased 50% of the total. After the strong demand seen in the 3-yr and 10-yr auctions earlier this week, investors had hoped for better results. Adding to the recent debate, Warren Buffett suggested that a second stimulus package "may well be called for". The Dow is up 5 points. Tomorrow, the Trade Balance, Import Prices, and Consumer Sentiment will be released.

The Fed purchased $17.1 billion in agency MBS during the weekly period ending July 8, from $23.1 billion the prior week. Freddie Mac reported that average mortgage rates fell in the week through July 9, with 30-yrs hitting 5.20%, from 5.32% the prior week.




In laymans terms this sounds to me like the Fed s purchase of mortgage backed securities dropped. If this keeps up and they dont buy as many then they may be comfortable with the rates where they are and will not try to buy more to make the rates fall. They were purchasing an average of 20 billion or more and this week only 17 billion.

If this happens they will once again raise rates ever so slowly.