MBS Pricing Snapshot

MBS and Treasuries moved into weaker territory immediately following the release of this morning's lower-than-expected Jobless Claims figures, but have since bounced back moderately. Fannie 3.0's are currently down 1 tick on the day at 104-07, off 2 ticks from the pre-claims highs. 10yr yields are up 1.5bps on the day at 1.718 after trading just under 1.71 before the data and hitting 1.725 at their worst.

Jobless Claims has proven to be the only significant source of inspiration this morning as overnight markets were generally calm. This was the expectation owing to a lack of data and events where the only standouts include UK GDP turning positive, Spanish Unemployment hitting a record 27.2%, and Italy being expected to form a government in the next few days.

All of that SOUNDS like big news, but markets haven't treated it as such. Reasons being: UK GDP and Spanish unemployment were both fairly close to the consensus. As far as Italy is concerned, markets have been gradually pricing in a similar scenario for weeks (ESPECIALLY this week when Napolitano was reelected, a new Prime Minister was named, and Italian credit spreads returned to pre-February Election levels, all before today's session). Bottom line: none of "that stuff" was a big surprise for markets.

With the only significant domestic data out of the way, MBS and Treasuries are left at the whim of tradeflows, technicals, and potential stock lever connection. To that end, cash equities open in about 10 minutes. In the afternoon, the last of the week's Treasury Auctions arrives in the form of 7yr Notes at 1pm. In and of themselves, they're not usually a big mover, but there can be some collective "relief" with the completion of the overall auction cycle. We're not expecting much in that regard, but it could be slightly beneficial if the auction results are close to average.

- Claims 339k vs 351k consensus
- 4-week average fell to 357.5k vs 361,250 previously
- Continued claims fell to 3.0 mil, lowest since May 08
- Market Reaction: Bond market weakness, but relatively contained so far. 10yr yields up less than 1.5 bps and Fannie 3.0s MBS off 4 ticks.

In the week ending April 20, the advance figure for seasonally adjusted initial claims was 339,000, a decrease of 16,000 from the previous week's revised figure of 355,000. The 4-week moving average was 357,500, a decrease of 4,500 from the previous week's revised average of 362,000.

The advance seasonally adjusted insured unemployment rate was 2.3 percent for the week ending April 13, a decrease of 0.1 percentage point from the prior week's unrevised rate. The advance number for seasonally adjusted insured unemployment during the week ending April 13 was 3,000,000, a decrease of 93,000 from the preceding week's revised level of 3,093,000. The 4-week moving average was 3,071,750, a decrease of 17,500 from the preceding week's revised average of 3,089,250.