MBS Pricing Snapshot

The NMI registered 52.1 percent in June, 1.6 percentage points lower than the 53.7 percent registered in May. This indicates continued growth this month at a slower rate in the non-manufacturing sector. The Non-Manufacturing Business Activity Index registered 51.7 percent, which is 3.9 percentage points lower than the 55.6 percent reported in May, reflecting growth for the 35th consecutive month.

The New Orders Index decreased by 2.2 percentage points to 53.3 percent, and the Employment Index increased by 1.5 percentage points to 52.3 percent, indicating continued growth in employment at a faster rate. The Prices Index decreased 0.9 percentage point to 48.9 percent, indicating lower month-over-month prices for the second consecutive month. According to the NMI, 12 non-manufacturing industries reported growth in June. Respondents' comments are mixed and vary by industry and company.

-30-year fixed-rate mortgage (FRM) averaged 3.62 percent with an average 0.8 point for the week ending July 5, 2012, down from last week when it averaged 3.66 percent. Last year at this time, the 30-year FRM averaged 4.60 percent.

-15-year FRM this week averaged 2.89 percent with an average 0.7 point, down from last week when it averaged 2.94 percent. A year ago at this time, the 15-year FRM averaged 3.75 percent.

-5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.79 percent this week, with an average 0.6 point, the same as last week. A year ago, the 5-year ARM averaged 3.30 percent.

-1-year Treasury-indexed ARM averaged 2.68 percent this week with an average 0.5 point, down from last week when it averaged 2.74 percent. At this time last year, the 1-year ARM averaged 3.01 percent.

Fannie 3.5 MBS are back at Tuesday's latest levels and 3.0s 1 tick better after an ECB rate cut, a big beat on ADP Employment, tepid Jobless Claims, and an ECB Press Conference created rampant volatility, albeit contained by broader ranges.

The ECB's rate cut at 7:45am weighed heavily on the Euro, taking it from over 1.25 to under 1.24. German Bund yields fell in slightly lower proportion, followed by US Treasury yields to yet another degree of lower proportion. All in all the ECB cut served more to steady potentially rising Treasuries than to cause a discernible movement in one direction or another.

The morning's next big news and most significant mover in terms of volume and price action was the significantly higher than expected ADP Private Payrolls report (176k vs 105k consensus). Bond markets weakened after this report as it suggests that NFP could be higher than expected. Yields stopped short of rising past Tuesday's highs and MBS held steady at Tuesday's price lows as well.

From there, an uneventful Jobless Claims report and reasonably downbeat comments from ECB Pres Mario Draghi helped bond markets continue their efforts to stay on the positive side of Tuesday's weakest levels. For now, they're still very much on the edge and the battle may well not be resolved until after the important ISM Non-Manufacturing report at 10am.

RTRS - ECB's Draghi - Economic Growth In Euro Zone Remains Weak

RTRS - ECB's Draghi - Heightened Uncertainty Weighs On Confidence And Sentiment

RTRS - ECB's Draghi - We Maintain Full Capacity To Achieve Price Stability

RTRS - Draghi - Q2 Indicators Point To Weakening Growth, Highlight Uncertainty

RTRS - Draghi - Expect Euro Zone Economy To Recover Gradually

RTRS - ECB's Draghi - Growth Momentum Dampened

RTRS - Draghi - Downside Risks To Growth From Financial Markets, Commodity Prices

RTRS - Draghi - Downside Inflation Risks From Weaker Than Expected Growth 05-Jul-2012

RTRS - Draghi - Upside Inflation Risks From Taxes, Commodity Prices

RTRS - Draghi-ECB Is Ready To Serve As Agent To Efsf/Esm In Conducting Market Operations

RTRS - Draghi-Transmission Of Twin Ltros Will Take Time, Credit Flows Remain Weak

RTRS - Draghi-We See Now A Weakening Of Growth In Whole Of Euro Area

RTRS – Draghi – Downside Risks For Economic Outlook Are Materializing

* 374k vs 385k consensus, and 388k last week
* 4 Week Average 385.75k vs 387.25k
* Continued Claims 3.306 mln vs 3.302 mln last time

In the week ending June 23, the advance figure for seasonally adjusted initial claims was 386,000, a decrease of 6,000 from the previous week's revised figure of 392,000. The 4-week moving average was 386,750, a decrease of 750 from the previous week's revised average of 387,500.

The advance seasonally adjusted insured unemployment rate was 2.6 percent for the week ending June 16, unchanged from the prior week's unrevised rate.

The advance number for seasonally adjusted insured unemployment during the week ending June 16 was 3,296,000, a decrease of 15,000 from the preceding week's revised level of 3,311,000. The 4-week moving average was 3,306,000, an increase of 9,250 from the preceding week's revised average of 3,296,750.

Employment in the U.S. nonfarm private business sector increased by 176,000 from May to June, on a seasonally adjusted basis. The estimated gain from April to May was revised up slightly, from the initial estimate of 133,000 to a revised estimate of 136,000.

Employment in the private, service-providing sector rose 160,000 in June, after rising a revised 137,000 in May. Employment in the private, goods-producing sector added 16,000 jobs in June. Manufacturing employment added 4,000, reversing May’s decline.