MBS Pricing Snapshot

The Thomson Reuters/University Of Michigan Consumer Sentiment Index Rose to it's highest level since September 2007. The headline index rose to 83.1 from 78.3 last month. Economists surveyed by Reuters expected a reading of 78.0.

Though all of the reports internal components were in better territory than September's final numbers, the "12-month economic outlook" component rose strikingly from 87 to 97. Inflation expectations fell to their lowest level since March 2009.

With thin volume and narrow trading ranges, the overnight session was impressively unimportant for bond markets. The best way we can think to describe the anticlimax of the past two domestic vs overnight sessions is that whatever uninspiring amount of air that existed in Bond markets' lungs, was simply, slowly, and uneventfully exhaled. In a word, "meh."

Although it didn't happen until 11:30-ish yesterday, the overnight exhalation has been followed by the reappearance of some level of activity, with Treasuries again rallying as they take their next breath.

MBS are just along for the ride, trying to keep pace as best they can into a moderate rally after hitting weekly highs yesterday afternoon. We're breaking through the 105-11 technical level at the moment and although we wish that was occurring in better volume, it's better than nothing.

Although we had several European headlines to digest, none of them have proven to be big market movers (even though we could imagine that some of them would have been in sessions past, building the sense that markets are determined to tune out today).

The next and last piece of economic data this morning hits in about half an hour with Consumer Sentiment. After that, things could die down fairly quickly if it doesn't deviate much from the consensus of 78.0.

MBS are currently up 3 ticks in Fannie 3.0s to 105-12 and 10yr Treasuries are down to 1.661. S&Ps are about 10pts lower than yesterday's mid-morning highs.

- PPI +1.1 vs +0.7 consensus
- Core PPI 0.0 vs +0.2 consensus, weakest in 1 year
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The Producer Price Index for finished goods rose 1.1 percent in September, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Prices for finished goods advanced 1.7 percent in August and moved up 0.3 percent in July. At the earlier stages of processing, prices received by manufacturers of intermediate goods rose 1.5 percent in September, and the crude goods index advanced 2.8 percent. On an unadjusted basis, prices for finished goods climbed 2.1 percent for the 12 months ended September 2012, the largest rise since a 2.8-percent increase for the 12 months ended March 2012.