This Week's Market UpdateDec 15 2011
Still hearing good selling of mortgages out of originators and money managers this morning, as stocks opened higher and appear to have found some support. Yesterday we saw Fannie 30 3s trade in the 99s and 3.5s print 102-22 – this appeared to be the catalyst for this wave of selling. While we are seeing regular selling by originators in the 3% coupon, which would imply mortgage rates of 3.5ish, I don’t expect 3s to become the new current coupon without the Fed being a huge buyer.
For now, it looks like investors and originators will look to take profits or sell production when 3s sniff par. A lot of data came in this morning, which was all generally positive for the US economy. Empire Manufacturing was much higher than expected at 9.52, +.61 from Nov. PPI rose +.3% in November, led by a sharp jump in food prices. Weekly jobless claims continued to fall with only 366k new claims. Stocks doing well, up 78pts right now and Fannie 3.5s are a few tics off the earlier highs at 102-16.