MBS Pricing Snapshot

Treasuries traded in a narrow sideways range during Asian hours despite an initial move higher in the Nikkei and Dollar/Yen. German Bunds had a bit of catching up to do with respect to yesterday afternoon's sell-off in Treasuries or they were simply responding to a slightly better-than-expected sentiment survey (or maybe both). Either way, Bund yields rose and Treasury yields followed.

All in all, the moves were moderate, but persistently weak. 10's were up near 2.2 by the start of the domestic session and remained under pressure through the uneventful 8:30am data. After topping out at just under 2.22, 10's are currently trading around 2.205

Fannie 3.5's opened 3-4 ticks weaker and shed a few more in concert with Treasury weakness. Fannie 3.5s have been trading flat around 103-03 since hitting lows of 103-02 just before data. Equities are almost perfectly in line with yesterday's 4pm levels according to Futures, but have been trending lower since 8:20am. With no remaining economic data today, markets will be "trading it out" ahead of the Fed tomorrow.

In other words, any movement we see is dependent on how trade flows shape up. All things being equal there isn't much motivation to move directionally as most position squaring was taken care of before yesterday afternoon's FT headline shook things up.

- Consumer Price Index +0.1495 vs +0.2 pct forecast
- Core CPI +0.1666 vs +0.2 pct forecast
- Consumer "real earnings" -0.1 pct

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.1 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 1.4 percent before seasonal adjustment.

The shelter index rose 0.3 percent and accounted for more than half of the seasonally adjusted all items increase in May. The energy index rose modestly, with the gasoline index flat but increases in the electricity and natural gas indexes accounting for the rise. The food index, however, turned down in May, with the food at home index falling 0.3 percent.

The index for all items less food and energy increased 0.2 percent in May. Besides the shelter increase, advances in the indexes for airline fares, recreation, and apparel also contributed to the rise. In contrast, the indexes for medical care and used cars and trucks declined in May.

The all items index increased 1.4 percent over the last 12 months, an increase from last month's 1.1 percent figure. The 12-month change in the index for all items less food and energy remained at 1.7 percent. The food index has risen modestly over the last 12 months, advancing 1.4 percent, while the index for energy has declined, falling 1.0 percent.

- Starts 914k vs 950k consensus, 856k previously
- Permits 974k vs 975k consensus, 1.005m previously
- Multifamily Starts up 21.6 pct, Single Fam up 0.3 pct
- Single Fam permits highest since May 2008

The U.S. Census Bureau and the Department of Housing and Urban Development jointly announced the following new residential construction statistics for May 2013:

BUILDING PERMITS
Privately-owned housing units authorized by building permits in May were at a seasonally adjusted annual rate of 974,000. This is 3.1 percent (±0.9%) below the revised April rate of 1,005,000, bu t is 20.8 percent (±1.3%) above the May 2012 estimate of 806,000.

Single-family authorizations in May were at a rate of 622,000; this is 1.3 percent (±1.1%) above the revised April figure of 61 4,000. Authorizations of units in buildings with five units or more were at a rate of 325,000 in May.

HOUSING STARTS
Privately-owned housing starts in May were at a seasonally adjusted annual rate of 914,000. This is 6.8 percent (±10.1%)* above the revised April estimate of 856,000 and is 28.6 percent (±14.4%) above the May 2012 rate of 711,000.

Single-family housing starts in May were at a rate of 599,000; this is 0.3 percent (±8.7%)* above the revised April figure of 5 97,000. The May rate for units in buildings with five units or more was 306,000