Mortgages Trade Higher Today
Mortgages are trading higher after Moody’s chimed in about Spain needing to make $25bb EURO in budget cuts and with China revising its expectations for slower growth. With a few weak US data points, the possibility of QE3 could be taking off again, Friday’s Non-Farm Payroll report could be it.
Today’s rally in bonds has Fannie 3.5s right back to the top of the recent range (103-22ish) and a lot of market participants that I’ve talked to are looking at this as a place to get short. I wouldn’t be surprised if mortgages started to come off of the highs into the close today.
Liquidity should dry up as the monthly prepayment speeds report is set to come out after the close and the mortgage market is anxious to see how HARP 2.0 has affected speeds.