Yesterday, we talked about the effect FNMA and FHLMC will have on the market, supporting the price of mortgage backed securities as they buy the produce out of the market.  That’s why we see bonds trading in a narrow range, boxed in by the theory that you’re damned if you go long (own bonds) or good luck if you are short (selling bonds).  The same thing applied to MBS given the FNMA/FHLMC buyback program.

Currently, pricing reflects a low volume. The 10 year note is off 7/32’s (yield 3.64%), mortgage backs unchanged, and stocks up 20 something on the big board.  Earlier today, ADP reported their estimate for Friday’s payroll numbers would be job losses of 20K with a revision higher to 60K in job losses in January.  ADP reported that adverse weather plays a small part in their methodology but it is not unreasonable that Friday’s Bureau of Labor Statistics report could print much higher (job losses).

ISM Non-manufacturing Index was also released, up 2.5 points to 53.00  This was a little better than expected and the highest level seen since October 2007.  The employment component did the most to goose the index higher, rising 4.0 points.  Tells us that hiring in the servicing sector is improving.

For the most part, it’s a quiet trading day with treasuries and mortgage backed product being supported by the massive MBS short/accelerated pay down program going on.  Not sure how long this bid (buying frenzy) will go on but until it’s over, it will help our mortgage pricing.

Tomorrow is set up day before the Employment Report –  released Friday morning, 7:30 am cst.