MBS Pricing Snapshot

MBS and Treasuries just slipped into negative territory after the Fed unveiled a liquidity plan it says is tougher than Basel III. It's not entirely clear if that news prompted the pull-back, but it coincides.

Fannie 3.5s are down to 102-20 after earlier highs of 102-25. There's an outside chance that a lender priced today's rate sheets during those highs and is already considering a negative reprice. Even then, we'd imagine most would hold out at least a few more minutes to observe any market-based effects of the New Home Sales data coming out at 10am.

It was an uneventful overnight session for Treasuries. 10's started out heading slightly higher in yield, but never broke above 2.51. 6am-8am saw the weakness turn around and we approached the 8:30am data from the best levels of the session.

At that time, 10's were near 2.485 and MBS were just edging up to 102-24 in Fannie 3.5s. The first move following data was weaker, but it now looks to be unwinding. 10's are back to unchanged levels and MBS--which had just been trading at unchanged levels--are now up 3 ticks to 102-23.

- Trade Deficit $38.8 bln vs $39.5 bln forecast

The U.S. Census Bureau and the U.S. Bureau of Economic Analysis, through the Department of Commerce, announced today that total August exports of $189.2 billion and imports of $228.0 billion resulted in a goods and services deficit of $38.8 billion, up from $38.6 billion in July, revised. August exports were $0.1 billion less than July exports of $189.3 billion. August imports were virtually unchanged at $228.0 billion.

In August, the goods deficit increased $0.1 billion from July to $58.2 billion, and the services surplus was virtually unchanged at $19.4 billion. Exports of goods decreased $0.3 billion to $132.4 billion, and imports of goods decreased $0.1 billion to $190.7 billion. Exports of services increased $0.1 billion to $56.8 billion, and imports of services increased $0.2 billion to $37.4 billion.

The goods and services deficit decreased $5.2 billion from August 2012 to August 2013. Exports were up $7.2 billion, or 3.9 percent, and imports were up $1.9 billion, or 0.9 percent.

- 350k vs 340k forecast, 362k previously
- Continued Claims 2.874 mln vs 2.875 mln forecast
- Market reaction: Bond markets unable to rally past morning's best levels so far. First detectable move is weaker (lower MBS prices).

In the week ending October 12, the advance figure for seasonally adjusted initial claims was 358,000, a decrease of 15,000 from the previous week's revised figure of 373,000. The 4-week moving average was 336,500, an increase of 11,750 from the previous week's revised average of 324,750.

The advance seasonally adjusted insured unemployment rate was 2.2 percent for the week ending October 5, unchanged from the prior week's unrevised rate. The advance number for seasonally adjusted insured unemployment during the week ending October 5 was 2,859,000, a decrease of 43,000 from the preceding week's revised level of 2,902,000. The 4-week moving average was 2,875,750, an increase of 17,750 from the preceding week's revised average of 2,858,000.