MBS Pricing Snapshot

- Inventories -0.2 pct vs +0.4 pct forecast
- Sales +0.4 vs +0.7 pct forecast
Market Reaction: None

The U.S. Census Bureau announced today that June 2013 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 $425.9 billion, up 0.4 percent (+/-0.5%)* from the revised May level and were up 5.6 percent (+/-2.8%) from the June 2012 level. The May preliminary estimate was revised downward $0.4 billion or 0.1 percent. June sales of durable goods were up 1.1 percent (+/-0.5%) from last month and were up 5.4 percent (+/-3.3%) from a year ago. Sales of electrical and electronic goods were up 3.7 percent from last month. Sales of nondurable goods were down 0.2 percent (+/-0.5%)* from May, but were up 5.8 percent (+/-3.9%) from last June. Sales of grocery and related products were down 1.8 percent from last month, while sales of petroleum and petroleum products were up 5.3 percent.

Total inventories of merchant wholesalers, except manufacturers’ sales branches and offices, after adjustment for seasonal variations but not for price changes, were $499.7 billion at the end of June, down 0.2 percent (+/-0.4%)* from the revised May level, but were up 2.9 percent (+/- 4.6%)* from the June 2012 level. The May preliminary estimate was revised downward $0.4 billion or 0.1 percent. June inventories of durable goods were virtually unchanged (+/-0.4%)* from last month, but were up 4.3 percent (+/-5.3%)* from a year ago. Inventories of motor vehicle and motor vehicle parts and supplies were down 1.5 percent from last month, while inventories of computer and computer peripheral equipment and software were up 2.1 percent. Inventories of nondurable goods were down 0.3 percent (+/-0.4%)* from May, but were up 0.7 percent (+/-5.6%)* from last June.

The June inventories/sales ratio for merchant wholesalers, except manufacturers’ sales branches and offices, based on seasonally adjusted data, was 1.17. The June 2012 ratio was 1.20

The overnight session was the quietest of the week for Treasuries Asian hours were almost perfectly flat with European hours seeing a moderate rally from 2.605 in 10yr yields to 2.58. This was primarily a factor of a small snowball rally in German Bunds which has since run its course. All told, 10's never made it under yesterday's lows overnight, despite several bounces at 2.58.

MBS opened in line with yesterday's POST-ROLL closing levels. In other words, September MBS closed at 103-31 (Fannie 4.0). Because yesterday's charted prices were based off the more expensive August MBS, this makes it look like prices fell overnight, but it's just the roll (switching the security we're looking at for a price indication because the one we WERE looking at, just fell off the assembly line. MORE HERE).

The only scheduled piece of economic data today--Wholesale Inventories at 10am--isn't much of a market mover. Inventories are expected to turn positive to the tune of +0.4 after last month's -0.5 reading. Beyond that, we have light volume/light liquidity trading on a relatively inconsequential week during the summer months. In such environments, movement reserves the right to be detached from headlines, events, and fundamentals as the will of the few can affect prices for the many.