PM Market Update

Unfortunately all the very important Retail Sales and PPI data that was scheduled for release this morning simply didnt happen due to the shutdown.

But we did get the Consumer Sentiment Index at 9:55EDT. It was lower than expected (75.2 vs est of 76.0 and a drop from the prior reading of 77.5). This was slightly positive for MBS.

Mortgage backed securities started the day +19BPS right out of the gate two factors. First, the financial markets were unhappy that yesterday's meeting between Boehner and Obama did not bear fruit. And that is temporarily positive for bonds. According to reports, it is likely to be a very temporary extension of six weeks. This will certainly just put us right back in this same situation again but...how knows? Maybe a more complete deal can be worked out during that period. So far though there has been no official announcement. Secondly, an analyst from Societe Generale put out a piece that stated that not only will Bernanke not taper for the remainder of his term but there is a potential that he may actually increase the monthly amount of bond purchases by the end of the year. This is of course, just his opinion but it is starting to gain some traction among traders as a probability.

MBS trended upward for the majority of the day and hit its high point (best rates of the day) at 11:15EDT with a high of +26BPS from yesterday's close. But that was apex, as MBS gradually started to sell off from their highs as our 10 day moving average once again proved to be a strong ceiling of resistance. MBS went from +26BPS down to -12BPS at 4:00EDT. That is a -38BPS sell off which caused you to see a reprice for the worse this afternoon.

****The Bond Markets will be closed on Monday for Columbus day.....NO pricing or live data on Monday***

Typically when we have a long weekend like this we see MBS trend upward as investors park their funds. But not in this case. In this case..just the opposite is occurring as the market is betting (again just betting) that come Tuesday the markets will open to news of at the very least a six week extension on the debt ceiling. And that is what is pressuring your pricing.