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Mortgage Rates

Thursday, October 24, 2013 - Article by: Anthony - Equity Investment Capital - Message

Mortgage backed securities (MBS) gained +6 basis points from Tuesday's close.

Yesterday was a very important test for the U.S. 10 year Treasury bond. If the 10 year broke below the 2.50 yield level, then you would see some better pricing on your end as MBS may try to test our 200 day moving average. We did make a run at it but failed to test our 200 day moving average for our benchmark FNMA 3.50 November coupon as we missed it by 31BPS.

The 10 year Treasury note did trade below the 2.50 yield level...dropping all the way down to 2.4713. At that point MBS rallied to their best levels of the day which was +31BPS higher than yesterday's close.

But Treasuries rebounded...getting back to 2.5011 and MBS sold off of their highs of +31BPS at 2:05EDT and sold off -25BPS from those highs down to +6BPS by 5:00EST.

Import Prices fell on a year-over-year basis which is a slight positive for our economy as so much of our raw materials or sub-assembly components come from overseas. With lower import costs, it is anti inflationary which is usually a positive for bonds.

Mortgage Applications dropped -0.6% for the week. MBS do not react to this data as demand for MBS is already known well before this report is released.

Across the Pond: U.S. based bonds are seeing more demand due to concern from overseas on a couple of fronts. First up is the banking sector in Europe as the European Central Bank (ECB) is set to start another round of bank stress tests...and this after some weak bank earnings. China's banking system is also under pressure as their major banks announced huge write offs on bad debts causing traders to be concerned about the projected growth rate in China.

Mortgage RatesAnthony HoodEquity Investment CapitalOffice: 949-891-0067Email: tony@equityinvestmentcapital.comwebsite:

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