RateAlert Snapshot 11/13/2013

Mortgage backed securities (MBS) lost -1 basis point from Tuesday's open (Monday was closed for Veteran's day).  So far, for the month of November, MBS have lost -198 basis points which has directly caused 30 year fixed mortgage rates to rise.

Our benchmark FNMA 3.50 December coupon traded in a very narrow range that was only 24 basis points wide from our highs to our lows.

There were no major economic reports.  We did have a 3 year Treasury auction: $30 billion at 0.644% with a very good bid-to-cover ratio of 3.46.  However, if you look at the above line chart - you will see no impact on pricing at 1EDT when the auction results were released.

We addressed the fact that Friday's sell off was not a "knee-jerk" reaction and to not expect any type of bounce to regain those loses as bond trader sentiment has turned from expecting a taper in the 2nd half of 2014 to much, much sooner.  And there was nothing released yesterday that would reverse that sentiment.  Federal Reserve Bank President Dennis Lockart said the Fed could begin to trim the amount of their current $85 billion bond buying program as soon as next month.  While this is just his opinion and not official policy, it simply adds more credence to the thought that the taper will happen sooner rather than later...which of course remains to be seen.