MBS Pricing Snapshot

* Sentiment 77.8 vs 76.2 consensus
* current conditions 87.3 vs 83.0 consensus
* expectations 71.7 vs 72.5 consensus
* 12 month outlook and inflation expectations close to unchanged
* sentiment index and current conditions highest since 1/2008

(Reuters) - U.S. consumer sentiment rose to its highest in more than four years in early May as Americans remained upbeat about the job market, a survey released on Friday showed.

The Thomson Reuters/University of Michigan preliminary May reading on the overall index on consumer sentiment improved to 77.8 from 76.4 in April, topping forecasts for 76.2. It was the highest reading since January 2008.

Despite the recent slowdown in job growth, nearly twice as many consumers reported hearing about new job gains than said they had heard about recent job losses, the survey said.

The data suggests that either more positive numbers on the labor market will be seen soon, or that consumers have ratcheted up their expectations too high, survey director Richard Curtin said in a statement.

"The most likely prospect is that job growth returns to a modest pace of gains and consumers trim their overly optimistic expectations, with not much change in overall confidence until after the November (presidential) election and the decisions on tax policy," said Curtin.

The overnight session was fairly uneventful after receiving a major "risk-off" adjustment late yesterday.

JPMorgan reveals $2 bln trading loss, CEO Dimon admits "egg on face"
(Reuters) - JPMorgan Chase & Co, the biggest U.S. bank by assets, said it suffered a trading loss of at least $2 billion from a failed hedging strategy, a shock disclosure that hit financial stocks and the reputation of the bank and its CEO, Jamie Dimon.

S&P futures shot down well over 10 pts on the news and never really recovered. Volume and volatility picked up slightly in the European session, but the expected news out of Spain regarding a plan to address its banking crisis proved to be of little concern for risk markets (more on that in the "day ahead" linked below).


Apart from scheduled Fed Twist buying in the 25-30yr sector from 10:15-11:00am, the only other scheduled event today is Consumer Sentiment at 9:55am. Technical levels are best observed in Treasuries as opposed to MBS with the mid 1.83's being the key resistance and/or pivot point "gateway" to further potential progress. 1.87-1.88 is the overhead support. As far as MBS are concerned, it would by psychologically "cool" to hold 104-00, but firmer support is 103-29 (if things happen to get weaker), followed by 103-22 (if they get appreciably weaker). Overhead resistance at 104-05/104-06.

* Headline PPI -0.2 pct vs 0.0 consensus
* Core PPI +0.2 pct as expected
* Year/Year Headline +1.9 vs +1.2 consensus
* Year/Year Core +2.7 vs +2.8 consensus
* year over year PPI lowest since October 2009

The Producer Price Index for finished goods fell 0.2 percent in April, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Prices for finished goods were unchanged in March and increased 0.4 percent in February. At the earlier stages of processing, prices received by manufacturers of intermediate goods decreased 0.5 percent in April, and the crude goods index moved down 4.4 percent. On an unadjusted basis, prices for finished goods advanced 1.9 percent for the 12 months ended in April, the seventh straight month of slowing year-over-year increases following a 7.0-percent rise for the 12 months ended September 2011.