The Bridgewaters, Massachusetts

Mortgage Backed Securities (MBSs) continued their volatile trading today. Treasuries are up substantially on the day while stocks are down on concerns that the recession is deepening, and that the government will require banks to comply with stricter bailout conditions. After the release of several economic reports, the FNMA 30-Year 4.5% coupon was up only 2/32, but is now down 5/32 in late afternoon trading as the selling off continues. There is a potential for mortgage rate repricing for the worse before the close of business today.

MBS traders will focus on the employment numbers on Friday. They are looking for evidence the recession is deepening while at the same time digest the expected record amount of debt needed to finance the myriad of anticipated government spending. On Wednesday, we get the Challenger & ADP job reports. This will provide a glimpse at the employment and layoff situation. The jobless claims report comes out on Thursday, while the Employment report for January comes out on Friday.