Meant to post this yesterday!

Big day on tap starting with the 10 year note auction (12:00 pm cst) and culminating with the President’s speech tonight on health care.  Bond and MBS traders seem to be caught somewhere between fixed income risk and safe haven harmony.  The risk comes on the heels of China’s Finance Minister’s comments about helicopter Ben Bernanke spreading money all over with the world, creating an environment for inflation.  Keep in mind that China is Americas banker.  The safe haven part of this comes from the old trading saying, “don’t fight the Fed” as Uncle continues to buy MBS, underpinning the market.  Case in point is the divergence between treasuries and MBS.  Currently, the 10 year note is off 12/32’s to yield 3.51% and yet MBS are off only 1/32nd.  The 30 year bond is down nearly 1 point.  Caution here as the spread can only tighten so much before the potential of MBS to fall due to the selling pressure on treasuries.  Today’s 10 year auction will be something to pay attention to.  In other news, mortgage applications surged 17% according to the Mortgage Bankers Association, gold is trading above $1000.00 (inflation fear), and Consumer Credit fell by a record 21.6 billion.  Stocks keep on creeping, up 30 points on the big board and as I mentioned, Austin mortgage pricing is hanging in there but commands your attention.