Technically, mortgage backed securities dropped today below another line of resistance which proved formidable earlier this year. Rates are really hedging ahead of some big data later this week.

Wednesday will bring us the most recent GDP reading, but that’s expected to remain at 3.0%.

Thursday we’ll see the Personal Consumption Expenditures Index, which is historically the Fed’s favorite gauge of inflation.  When they say they want inflation to drop below 2.0%, the PCE is the measuring stick. Last month we saw a headline reading of 2.24% and are expecting a drop to 2.1%.  Stripping out food and energy, the Core figure registered 2.68% last month and that should also drop to a nice round 2.6%.  The price of oil dropping over 5% this morning should help next month’s Core number come down though.

This Friday brings us the monthly Jobs Report.  Last month’s 254K new jobs is what put interest rates on the up elevator in the first place.  We’re only expecting 123K new jobs with this week’s report.  Hopefully that’ll be enough to cut the escalator’s power supply.

The CME group survey is currently calculating a 98.3% probability that the Fed cuts overnight rates by another 1/4% at the conclusion of next week’s FOMC meeting. Remember that mortgage rates jumped after the September rate cut.  This week’s data will greatly impact how long term rates perform going into Fedweek.