Mortgage Market Minute: 
In MBS-land, the FNMA 4.5% is down -.125 to 101.75, the 5.0% down -.06 to 102.97, and the 5.5% even at 103.78.  Trading is choppy and MBS have made a couple big slides towards fresh lows, only to recover slightly.  So, caution is the order of the day.  After a bumpy open, the stock market is making good progress clawing its way back to even.  Treasuries are definitely lower across the board, with the 10-year is at 98-23/32 down -1-3/32, the yield up to 2.90% up +0.13%, despite a government report which shows unemployment at a 25-year high.  Treasuries extended losses after Federal Reserve Chairman Ben S. Bernanke said in a speech in Charlotte, North Carolina, the central bank must retain the flexibility to withdraw its record injection of credit into the economy to keep inflation in check when the crisis abates. Investors are concerned that the supply of Treasuries will flood the market as the government issues record amounts of debt to fund its economic rescue efforts.  Buyers are preparing for an auction of an estimated $59 billion in notes and inflation-indexed securities next week.  Bondholders are also worried about inflation, which erodes the value of fixed income assets.  

Unemployment rate hits 8.5%, expected to climb further.
The Labor Department said that the economy shed 663,000 jobs in March, bringing losses since the slump began to about 5.1 million, the worst in the postwar era. The total jobless rate hit 8.5%, in line with forecasts, and marking the highest level since 1983, when the country was recovering from a recession that pushed the rate to 11%.  Service industries shrank at a faster pace, indicating the economy remains trapped in what’s likely to be the longest recession since the 1930s. The average number of hours worked fell to 33.2 per week, the fewest since records began in 1964. Fed Vice Chairman Donald Kohn said that we aren’t “out of the woods yet,” and that the Administration and the Fed must be ready to take further measures.  Experts predicted that the massive unemployment numbers would make it tougher for Obama to make good on his pledge to save or create 3.5 million jobs.  “We could continue to see a few more months of really bad employment numbers before it starts to ease,” said Nariman Behravesh, chief economist at IHS Global Insight in Lexington, Massachusetts. Behravesh projected the jobless rate will peak at 10% - 10.5% percent in early 2010. “We aren’t there yet, but we are getting closer to a bottom,” he said.

Goldman: Mark-to-Market change won’t help bank stocks
Bank stocks in the S&P500 advanced +4.2% yesterday after the FASB relaxed mark-to-market rules that banks claim are unfair when markets are inactive. The new rules will allow companies to use “significant” judgment in gauging prices of some investments on their books, including mortgage-backed securities.   But, according to Goldman Sachs Group Inc, the relaxation of mark-to-market rules won’t prevent bank shares from falling because growth in bad loans is accelerating. “Our core view is that banks will not bottom until underperforming asset growth decelerates,” wrote Richard Ramsden, a New York-based analyst at Goldman Sachs. “Loans are going bad faster than banks earn money.” Bank stocks were on the retreat today, preventing the stock market from extending recent gains.  Delinquent loans are increasing at a 3% annual rate industrywide, compared with a 2.5% rise in earnings before setting aside money for bad loans, according to Goldman, and with new delinquencies, regulators may force major banks to write down as much as $1 trillion in loans.  That’s twice what they’ve already recorded, and the writedowns may make sales worth as little as $0.32 on the dollar -- less than half of the $0.84 that the Treasury suggested as a purchase price. 

On today’s date:  April 3…
1860:  Pony Express began between St. Joseph Missouri and Sacramento California
1922:  Stalin appointed General Secretary of Communist Party
1926:  2nd flight of a liquid-fueled rocket by Robert Goddard
1933:  1st airplane flight over Mount Everest
1941:  Churchill warns Stalin of German invasion
1975:  Bobby Fischer stripped of world chess title for refusing to defend it
1986:  U.S. national debt hits $2 Trillion.

The last word:
“I used to jog but the ice cubes kept falling out of my glass.” -- David Lee Roth