MBS Pricing Snapshot

National vacancy rates in the first quarter 2012 were 8.8 percent for rental housing and 2.2 percent for homeowner housing, the Department of Commerce’s Census Bureau announced today. The rental vacancy rate of 8.8 percent was 0.9 percentage points lower than the rate recorded in the first quarter 2011 (+/-0.4 percentage points) and 0.6 percentage points lower than last quarter (+/-0.4). The homeowner vacancy rate of 2.2 percent was 0.4 percentage points lower than the first quarter 2011 rate (+/-0.2) and 0.1 percentage point lower (+/-0.1)* than the rate last quarter (2.3 percent).

The homeownership rate of 65.4 percent was 1.0 percentage points (+/-0.4) lower than the first quarter 2011 rate (66.4 percent) and 0.6 percentage points (+/-0.4) lower than the rate last quarter (66.0 percent).

Charts, Tables, and More Data:

The Chicago Institute for Supply Management today reported that its Purchasing Management Index fell to 56.2 in April vs 62.2 in March. Economists surveyed by Reuters expected today's reading to hit 61.0.

Although this is the lowest level for the index since November 2009, a reading above 50.0 indicates that business activity continues to expand, a trend that has remained intact since October 2009.

Drops in New Orders and Production accounted for a majority of the weakness while the Employment component actually improved to 58.7 from March's 56.3.

market reaction: perhaps even weaker than the report itself with both MBS and Treasuries gesturing toward the morning's best levels only to shy away rather quickly. That said, the story isn't over yet. Volumes are still on the low side and further stock selling could have a beneficial effect for bond markets given the low volume and absence of other market moving data.

Volume and volatility were all but absent overnight as much of Asia was out of commission for the start of "golden week." European trading did little to move things from Friday's latest levels despite Spain's 0.1 pct GDP beat. European participation was also lower as many participants opt for a 4 day weekend through tomorrow's May Day holiday.

Domestically, things are slightly improved in the first hour of trade with the Incomes/Outlays report having very little impact as expected. Volume has been flat, steady, and low. More to the point, and without consideration of any rallying or selling in bond markets, we can observe 10yr yields bounce at 1.9102 this morning without going lower. This seems to be a validation of uninspired range-trading considering the recent domestic session low on 4/23 of 1.9104.

MBS are 3 ticks higher this morning in Fannie 3.5 coupons at 103-26, a mere eighth of a point off 4/10 highs. That said, the current range is the highest that production MBS have stably been, not to mention the fact that this jaunt is already more stable than previous visits.

The only other scheduled economic data of the morning arrives in about 20 minutes with Chicago PMI. It's not normally a tremendous market mover, but its impact could be more noticeable today due to light volume.

* Income +0.4 pct vs +0.3 pct consensus
* Spending +0.3 pct vs +0.4 pct consensus
* Core PCE +0.1583 vs +0.2 pct consensus
* Savings rate 3.8 vs 3.7 previously
* 'Real' consumer spending +0.1 pct vs +0.5 pct previously

Personal income increased $50.3 billion, or 0.4 percent, and disposable personal income (DPI) increased $42.5 billion, or 0.4 percent, in March, according to the Bureau of Economic Analysis. Personal consumption expenditures (PCE) increased $29.6 billion, or 0.3 percent. In February, personal income increased $39.6 billion, or 0.3 percent, DPI increased $29.4 billion, or 0.2 percent, and PCE increased $93.7 billion, or 0.9 percent, based on revised estimates.

Real disposable income increased 0.2 percent in March, in contrast to a decrease of 0.1 percent in February. Real PCE increased 0.1 percent, compared with an increase of 0.5 percent.

Private wage and salary disbursements increased $17.3 billion in March, compared with an increase of $24.1 billion in February. Goods-producing industries' payrolls decreased $1.3 billion, in contrast to an increase of $1.8 billion; manufacturing payrolls increased $0.1 billion, compared with an increase of $1.6 billion. Services-producing industries' payrolls increased $18.6 billion, compared with an increase of $22.3 billion. Government wage and salary disbursements increased $1.4 billion, compared with an increase of $0.7 billion.