2/26/10

Most rate prices are level as mortgage bonds hold onto gains and Treasuries grind lower. The 10-year yield is back down below 3.625% this morning—the lowest since Feb 10. Bonds are benefitting from continued turmoil in the sovereign debt arena—i.e. Greece—and worse than expected existing home sales and consumer sentiment which are trumping better than expected GDP and business activity numbers. Today’s home and consumer data validates yesterday’s bad news, bolstering bearish sentiment. Adding to bond friendliness we have the expected month end balanced fund tactical asset allocations out of stocks and into bonds. Well, the Fed is down to digging deep in its pocket as only $9 Billion per week remains in its allocated MBS piggy bank ($11 Billion was spent in the last week). That equates to less than $2 Billion per week--not enough to soak up all of originator supply--which could make for some interesting sessions ahead. Rates are low. Have a great weekend.