MBS Pricing Snapshot

- Factory Orders +4.8 pct vs +4.6 pct consensus

New orders for manufactured goods in September, up two of the last three months, increased $22.0 billion or 4.8 percent to $475.4 billion, the U.S. Census Bureau reported today. This followed a 5.1 percent August decrease. Excluding transportation, new orders increased 1.4 percent.

Shipments, up two of the last three months, increased $4.1 billion or 0.9 percent to $481.3 billion. This followed a 0.2 percent August decrease. Unfilled orders, up three of the last four months, increased $1.7 billion or 0.2 percent to $981.0 billion. This followed a 1.7 percent August decrease. The unfilled orders-to-shipments ratio was 6.24, down from 6.28 in August.

Inventories, up three consecutive months, increased $3.7 billion or 0.6 percent to $615.7 billion. This was at the highest level since the series was first published on a NAICS basis in 1992 and followed a 0.6 percent August increase. The inventories-to-shipments ratio was 1.28, unchanged from August.

The overnight session was relatively flat for bond market and equities with the 10yr trading perfectly inside yesterday afternoon's range. S&P futures were completely unchanged from 5pm to 8am. The same was true for MBS as Fannie 3.0s opened right at 5pm levels at 104-20.

There was a good amount of shock value from the NFP headline (+171k vs +125k consensus). The surprise isn't only that the headline was better-than-expected, but also that it's the second report in a row that hasn't been significantly worse-than-expected. Additionally, the revisions to the past two months were both much higher.

By all rights then, we should be in the throws of a major sell-off for bond markets yet we find Fannie 3.0s down only 1 ticks at 104-19 and 10yr yields up only 2.5 bps at 1.756. In a similarly surprising lack of movement, S&P futures are up only about 5 points.

Whether this has to do with "election uncertainty," or whether it's still simply "not good enough," remains to be seen. Whatever the case, on a week that's felt as long as this one, we certainly won't argue with the price action and hope the paradoxical resilience continues to at least hold this ground.

- October NFP +171k vs +125k Consensus
- September revised up to 148k from 114k
- August Revised up to 192k from 142k
- UNR 7.9 vs 7.9 Consensus
- Labor Force Participation rate increased from 63.6 to 63.8
- Private Payrolls +184k vs +125k consensus

Total nonfarm payroll employment increased by 171,000 in October. Employment growth has averaged 157,000 per month thus far in 2012, about the same as the average monthly gain of 153,000 in 2011. In October, employment rose in professional and business services, health care, and retail trade.

The change in total nonfarm payroll employment for August was revised from +142,000 to +192,000, and the change for September was revised from +114,000 to +148,000.

Both the unemployment rate (7.9 percent) and the number of unemployed persons (12.3 million) were essentially unchanged in October, following declines in September.