Market Update

FNMA 30-YR 4.0%

Previous close 99.125
Opened Down 0.25bp @ 98.875

Key Economic Data:

EUR / USD  1.3760  Up  0.0066
USD / JPY  81.6003  Down  0.4445
GBP / USD  1.6093  Up  0.0079

OIL  91.55  Down  0.64
Gold  1,339.30  Up  4.80

Key Economic News:

ISM manufacturing, construction outlays, vehicle sales, and the weekly confidence survey...

10:00: ISM manufacturing index for Jan...upside risk. This should be a solid report on momentum in the US manufacturing sector.
Median forecast (of 78): 58, ranging from 556 to 59.5; last 58.5 (revised from 57.0).

10:00: Construction outlays for Dec...which way? Most forecasters anticipate a small increase in outlays, but there are some expectations of significant declines.
Median forecast (of 49): +0.1%, ranging from -1.3% to +0.5%; last +0.4%.

Late morning/early afternoon: Lightweight vehicle sales for Jan...hurt by poor weather and limited supply? Anecodotal reports from the manufacturers suggest a modest hit to sales from poor weather and tight inventories for popular models, but others see a firmer outcome.
For total sales: median forecast (of 38): 12.6mm, ranging from 11.8mm to 12.9mm; last 12.53mm.
For domestic: median forecast (of 17): 9.42mm, ranging from 9.2mm to 9.7mm; last 9.46mm.

17:00: ABC consumer comfort index...faint signal through a lot of noise. If you squint real hard, this index exhibits a very small upward trend from early 2008 on, but it has backed off a 2 1/2 year high over the past two weeks.

Advice:

With the news out of Egypt, it looks like Friday will be a big day. The weaker dollar could help the MBS market, unless we see some crazy numbers out of vehicle sales. I see the market trading around the 99.000 mark.

I don't believe this is a time to gamble. I would lock today.



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