MBS Pricing Snapshot

One needn't look far this morning to find news crediting Japan's overnight sell-off with US Treasuries' overnight strength. Improvements in 10's bordered on obligatory though, with yields clawing around in roughly similar territory to the lows of the past 3 sessions, between 2.16 and 2.18, and those were just falling out of the frame by the time the domestic session began. Bottom line, Japan continues to have an impact, but not to set the tone (something that looked more possible until 5/22 FOMC Minutes when Japanese markets did a brutally fast 180).

With that reality of domestic considerations moving domestic trading levels more than anything else, it's no surprise to see measured weakness following generally stronger employment and spending data this morning. Jobless Claims beat consensus by just over 10k, and Retail Sales were 0.2 pct stronger than expected (though 'as expected' at the so-called "core" level that strips out more volatile components).

In light of those moderate beats, the weakness has been moderate, and can even be viewed as a continuation of a trend in place since yields bottomed out in the 4am hour. 10's are up to 2.212 currently and Fannie 3.5s are 2 ticks stronger at 102-29, off earlier highs of 103-00. Only second tier data remains in the AM hours with Business Inventories at 10am. The bigger chance of volatility is at 1pm with the 30yr Bond auction.

- Import Prices -0.6 vs 0.0 forecast
- Export Prices -0.5 vs 0.0 forecast

U.S. import prices decreased for the third consecutive month in May, falling 0.6 percent, after declines of 0.7 percent in April and 0.1 percent in March. The 1.4 percent drop in import prices over the past three months followed a 1.4 percent increase for the first two months of 2013. Overall import prices fell 1.9 percent for the year ended in May, and have not recorded a 12-month advance since the index rose 0.8 percent between April 2011 and April 2012.

Prices for U.S. exports decreased 0.5 percent in May, driven by lower nonagricultural prices which more than offset higher agricultural prices. The May decrease in export prices marked the first time the index has declined for at least three consecutive months since the end of 2008. The price index for exports fell 0.9 percent over the past year, led by falling nonagricultural prices. In contrast, agricultural prices rose over the same period.

- Claims 334k vs 345k forecast
- 4-wk average 345,250 vs 352,500
- Continued claims 2.973 vs 2.975 mln

In the week ending June 8, the advance figure for seasonally adjusted initial claims was 334,000, a decrease of 12,000 from the previous week's unrevised figure of 346,000. The 4-week moving average was 345,250, a decrease of 7,250 from the previous week's unrevised average of 352,500.

The advance seasonally adjusted insured unemployment rate was 2.3 percent for the week ending June 1, unchanged from the prior week's unrevised rate. The advance number for seasonally adjusted insured unemployment during the week ending June 1 was 2,973,000, an increase of 2,000 from the preceding week's revised level of 2,971,000. The 4-week moving average was 2,967,250, a decrease of 12,750 from the preceding week's revised average of 2,980,000.

- Headline +0.6 vs +0.4
- Excluding autos, +0.3 vs +0.3
- Excluding autos/gas/building material +0.3 vs +0.3

The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for May, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $421.1 billion, an increase of 0.6 percent (±0.5%) from the previous month, and 4.3 percent (±0.7%) above May 2012. Total sales for the March through May 2013 period were up 3.7 percent (±0.5%) from the same period a year ago. The March to April 2013 percent change was unrevised from 0.1 percent (±0.3%)*.

Retail trade sales were up 0.7 percent (±0.5%) from April 2013 and 4.3 percent (±0.7%) above last year. Nonstore retailers were up 11.3 percent (±2.1%) from May 2012 and building material and garden equipment and supplies dealers were up 10.1 percent (±4.0%) from last year.