MBS Pricing Snapshot

* Inventories +0.6 vs +0.4 Consensus
* Sales +1.1 vs +0/3 Consensus

The U.S. Census Bureau announced today that April 2012 sales of merchant wholesalers, except manufacturers’ sales branches and offices, after adjustment for seasonal variations and trading-day differences but not for price changes, were $415.0 billion, up 1.1 percent (+/-0.5) from the revised March level and were up 6.8 percent (+/-0.9%) from the April 2011 level. The March preliminary estimate was revised downward $0.5 billion or 0.1 percent. April sales of durable goods were up 0.1 percent (+/-0.9%)* from last month and were up 8.1 percent (+/-0.9%) from a year ago. Sales of motor vehicle and motor vehicle parts and supplies were up 3.8 percent from last month. Sales of nondurable goods were up 1.9 percent (+/-0.7%) from March and were up 5.9 percent (+/-1.2%) from last April. Sales of petroleum and petroleum products were up 4.8 percent from last month and sales of farm product raw materials were up 4.2 percent.

Total inventories of merchant wholesalers, except manufacturers’ sales branches and offices, after adjustment for seasonal variations but not for price changes, were $483.5 billion at the end of April, up 0.6 percent (+/-0.4%) from the revised March level and were up 8.2 percent (+/-1.1%) from the April 2011 level. The March preliminary estimate was revised upward $0.1 billion. April inventories of durable goods were up 1.1 percent (+/-0.4%) from last month and were up 11.4 percent (+/-1.6%) from a year ago. Inventories of machinery, equipment, and supplies were up 2.4 percent from last month and inventories of lumber and other construction materials were up 1.9 percent. Inventories of nondurable goods were down 0.1 percent (+/-0.5%)* from March, but were up 4.0 percent (+/-1.8%) from last April. Inventories of drugs and druggists' sundries were down 2.4 percent from last month, while inventories of paper and paper products were up 3.9 percent.

(Reuters) - Spain is expected to ask the euro zone for help with recapitalizing its stricken banks at the weekend, EU and German sources said on Friday, becoming the fourth country to seek assistance since Europe's debt crisis began.

Five officials in Brussels and Berlin said the finance ministers of the single currency area would hold a conference call on Saturday morning to discuss a Spanish request for aid, although no figure on the assistance has been set.

The Eurogroup, which comprises the 17 euro zone states, will issue a statement after the call, which is scheduled to take place before midday (1000 GMT), the sources said.

"The announcement is expected for Saturday afternoon," one of the EU officials said.

The dramatic move comes after Fitch Ratings cut Madrid's sovereign credit rating by three notches to BBB on Thursday, highlighting the Spanish banking sector's exposure to bad property loans and to contagion from Greece's debt crisis.

"The government of Spain has realized the seriousness of their problem," a senior German official said.

(Reuters) - The Federal Reserve rejected pleas by the U.S. banking industry in releasing on Thursday a rigorous interpretation of an international agreement on higher capital standards for banks, known as Basel III.

U.S. banks have pushed the Fed, for instance, to allow them to more heavily count mortgage servicing rights and the unrealized gains and losses of certain securities toward their capital requirements than allowed by Basel III, but the U.S. central bank's draft rule closely follows the international agreement.

"Some of the major, major things the industry, particularly the big banks, were looking for it sounds to me like the Fed showed them no mercy," said Karen Petrou, managing partner of Washington-based Federal Financial Analytics.

The U.S. Census Bureau and the U.S. Bureau of Economic Analysis, through the Department of Commerce, announced today that total April exports of $182.9 billion and imports of $233.0 billion resulted in a goods and services deficit of $50.1 billion, down from $52.6 billion in March, revised. April exports were $1.5 billion less than March exports of $184.4 billion. April imports were $4.1 billion less than March imports of $237.1 billion.

In April, the goods deficit decreased $2.7 billion from March to $64.8 billion, and the services surplus decreased $0.1 billion from March to $14.8 billion. Exports of goods decreased $1.5 billion to $130.7 billion, and imports of goods decreased $4.1 billion to $195.5 billion. Exports of services decreased $0.1 billion to $52.2 billion, and imports of services increased $0.1 billion to $37.5 billion.

The goods and services deficit increased $6.5 billion from April 2011 to April 2012. Exports were up $7.2 billion, or 4.1 percent, and imports were up $13.8 billion, or 6.3 percent.

The overnight session was generally bond-market-positive and risk-negative. Stocks saw most of their weakness just after the Asian open and stayed fairly sideways from there. Treasuries weren't as aggressively-bid right out of the chute, but became more so as a standard-issue raft of disconcerting pre-weekend headlines crossed, mostly concerning Spain.

Treasuries followed Bunds lower in yield and just a few minutes ahead of this morning's domestic economic data we find 10yr yields down to 1.57 and MBS 9 ticks improved in Fannie 3.0's to 102-23 and 6 ticks better in Fannie 3.5's at 105-06.