This might seem a little confusing, but it is a good sign rates will continue to improve this week...read on.....

Mortgage Market Commentary

Mortgage backed securities (MBS) prices moved higher (rates lower) due to weakness in the stock market on speculation lower than forecast corporate profits will spur demand for the relative safety of fixed income assets like MBS; FNMA 4.0% coupon 100.22bps, +19bps and the high of the session. The DOW and S&P 500 are down over 2%. The Treasury will sell a record $35 billion of 3yr notes tomorrow and $18 billion of 10yr notes April 9th. The Fed will tomorrow buy U.S. debt joining the U.K. & Japan in extraordinary purchases of government debt to broaden efforts to unfreeze credit after cutting the benchmark interest rate close to zero. With almost $1.3 trillion in losses and write downs at financial companies, combined with the deep economic slowdown, companies finances have weakened reducing their ability to pay debt. So far this year 79 firms have failed to meet their obligations with 35 companies defaulting in March alone, the highest number in a single month since the 1930's. U.S. corporate bonds yields compared to Treasuries are 768bps above; the spread was 143bps two years ago!