Quick Market Outlook
Higher prepay speeds are having less effect on the market than Barney Frank’s retirement announcement did on his dry cleaning bill. Mortgages are better bid out of the gate, with Fannie 3.5s up 7 tics. Despite higher dollar prices (3.5s now trading above 102), flows from originators have been averaging an anemic 1 billion per day. Prepayment speeds came out at yesterday’s close in-line with market expectations, up 2-4 CPR month-over-month.
The situation in Europe is still center stage. The ECB meets tomorrow and is expected to cut rates by 25bps. We’re also expecting other announcements including the introduction of a two year liquidation program and easier collateral arrangements.
Only thing on the economic calendar today is Consumer Credit, which is expected to drop to $7bb. Stocks are down a little right now, S&P -10pts/DOW -75pts.