MBS Pricing Snapshot

As-expected Retail Sales data is had been helping to push back against a collection of overnight data and events in Europe and Asia that conspired to lift 10yr yields to 2.02 earlier this morning, though we're right back to the weakest levels of the morning now.

Before that, Asia was fairly inconsequential last night, despite ongoing volatility in the Yen (yeah, currency is hot-topic suddenly) surrounding the G7 meeting. Chinese holidays continue to keep much of the Asian trading contingent sidelined this week. US Treasuries and Euros (yeah... the currency), didn't budge until the European session began.

When it did, it was almost an exclusively negative thing for domestic bond markets. Eurozone Industrial Production came in at +0.7 vs +0.2 expectations, and Italy's debt auctions were well-received. Unlike a well-received US Treasury auction, when Europe's periphery sees strong auctions, it typically has a negative impact on safer haven German Bunds and US Treasuries. Hawkish comments inflation comments from the Bank of England also weighed on safe-haven debt (British Gilts actually led the weakness, followed by German Bunds, and US Treasuries).

This ushered Treasuries in the door between 2.0 and 2.01. We saw 2.019 ahead of Retail Sales, but the tepid report helped a moderate bounce lower to 2.0. All the while MBS haven't moved much, holding a range from 102-23+ to 102-25. Import/Export data was released at the same time, but even spending this one sentence mentioning it, is more than it deserves.

Whatever positive response we might have been hoping for following Retail Sales has just now been fully unwound as 10yr yields cross back over the highs of the morning. MBS will likely be breaking their 102-23 lows and we'll likely be sending you another update at the next notable stop on this little morning roller coaster. 10's are currently up to 2.0241 and climbing.

- Headline Sales +0.1 vs +0.1 Consensus, +0.5 Previous
- Excluding Gasoline +0.1 vs +0.8 Previous
- Gasoline +0.2 vs -1.7 Previous
- Cars/Parts -0.1 vs +1.2 Previous

The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for January, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $416.6 billion, an increase of 0.1 percent (±0.5%)* from the previous month and 4.4 percent (±0.7%) above January 2012. Total sales for the November 2012 through January 2013 period were up 4.5 percent (±0.5%) from the same period a year ago. The November to December 2012 percent change was unrevised from +0.5 percent (±0.3%).

Retail trade sales were up 0.1 percent (±0.5%)* from December 2012 and 4.1 percent (±0.8%) above last year. Nonstore retailers were up 15.7 percent (±2.3%) from January 2012 and auto and other motor vehicle dealers were up 9.4 percent (±2.3%) from last year.