MBS Pricing Snapshot

30-year fixed-rate mortgage (FRM) averaged 3.71 percent with an average 0.7 point for the week ending June 14, 2012, up from last week when it averaged 3.67 percent. Last year at this time, the 30- year FRM averaged 4.50 percent.

15-year FRM this week averaged 2.98 percent with an average 0.7 point, up from last week when it averaged 2.94 percent. A year ago at this time, the 15-year FRM averaged 3.67 percent.

5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.80 percent this week, with an average 0.6 point, down from last week when it averaged 2.84. A year ago, the 5-year ARM averaged 3.27 percent.

1-year Treasury-indexed ARM averaged 2.78 percent this week with an average 0.5 point, down from last week when it averaged 2.79 percent. At this time last year, the 1-year ARM averaged 2.97 percent.

The key piece of data this morning was the weekly Jobless Claims report, not only because it's more interesting than the Consumer Price Index and the Current Account reports in general (given the state of inflation and the fact that the other report is looking back at Q1 in a time where the next 6 days are much more meaningful to the global economic future) but also because this is "survey week" for Jobless Claims.

That means that this is the week of the NFP survey's that will be reported in early July. So today's Jobless Claims, while not nearly as important as an NFP report, are generally perceived to be somewhat more important than the other Jobless Claims prints. As such, we'd expect to see a positive reaction in bond markets to a weaker-than-expected report, and it looked like we were getting that at first.

But markets faded the generally lackluster economic data for whatever reason. Candidates include the stock lever, a technical floor in 10's in the mid 1.59's and the knowledge that there's a 30yr bond auction to take down this afternoon. More likely those factors worked in synergy.

Additionally, the "fade" didn't last too long before finding some support. For 10's this was just over 1.62% and Fannie 3.5's at 104-22. 10's are currently back down to 1.6096 and Fannie 3.5 MBS are 3 ticks lower on the day, but improved from the day's lows, currently at 104-25. There are no additional significant economic data/events until the 1pm 30yr Bond Auction.

* Q1 deficit 137.3 bln vs 132.3 bln consensus, 117.7 bln prev.
* Largest since 2008
* Deficit equal to 3.6 pct GDP vs 3.1 pct last time

The U.S. current-account deficit—the combined balances on trade in goods and services, income, and net unilateral current transfers—increased to $137.3 billion (preliminary) in the first quarter, from $118.7 billion (revised) in the fourth quarter. Most of the increase in the current-account deficit was accounted for by a decrease in the surplus on income and an increase in the deficit on goods and services.

The Consumer Price Index for All Urban Consumers (CPI-U) decreased 0.3 percent in May on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 1.7 percent before seasonal adjustment.

The gasoline index declined 6.8 percent in May, leading to a sharp decrease in the energy index and the decline in the all items index. The indexes for natural gas and fuel oil declined as well, though the electricity index increased. The food index was unchanged, with a slight decline in the index for food at home offsetting an increase in the food away from home index.

The index for all items less food and energy rose 0.2 percent in May, the third consecutive such increase. The indexes contributing to the increase were largely the same ones as in April: shelter, medical care, used cars and trucks, apparel, airline fares, and new vehicles. The indexes for household furnishings and operations and for tobacco declined.

The 12-month change in the index for all items was 1.7 percent in May; this figure has been declining steadily since its 3.9 percent recent peak in September 2011. The decline has been driven mostly by the energy index, which decreased 3.9 percent over the last 12 months. This was its first 12-month decline since October 2009. The 12-month change in the food index, which was 4.7 percent as recently as December, fell to 2.8 percent in May. The 12-month change in the index for all items less food and energy was 2.3 percent in May, the same figure as in April and March.

* Claims up 386k vs 375k consensus
* Last week revised to 380k from 377k
* 4-week average rose to 382k
* continuing claims 3.27 mln vs 3.311 mln last time
* This is the "survey week" for non-farm payrolls

In the week ending June 9, the advance figure for seasonally adjusted initial claims was 386,000, an increase of 6,000 from the previous week's revised figure of 380,000. The 4-week moving average was 382,000, an increase of 3,500 from the previous week's revised average of 378,500. The advance seasonally adjusted insured unemployment rate was 2.6 percent for the week ending June 2, unchanged from the prior week's unrevised rate. The advance number for seasonally adjusted insured unemployment during the week ending June 2 was 3,278,000, a decrease of 33,000 from the preceding week's revised level of 3,311,000. The 4-week moving average was 3,281,500, a decrease of 2,500 from the preceding week's revised average of 3,284,000.