Mortgage Market Update 2

Yesterday, mortgage backed securities managed to have a small rally and close higher by about .375 in discount. When I say we closed higher by .375 in discount I mean that if a rate was costing .375 in points that rate would cost nothing today. The main driving force for the improvement was a big rally in treasuries which drove the yield from over 3.03 to as low as 2.88 on the 10 yr Treasury note. Unfortunately, overnight we have given back most of the gains but we are still higher than where we opened yesterday. We can give treasuries the credit for the improvement yesterday and we can blame them this morning for the loss. Currently, the 10 year Treasury note is moving back higher and is at a yield of 2.95. It seems of late that mbs are very much attached to treasuries, following them higher and lower but to a lesser degree.