MBS Pricing Snapshot

It's somewhat of an interesting morning so far with the usual suspects having done surprisingly little to move markets. Those "suspects" include economic data and the press conference with ECB Pres Mario Draghi following the ECB's decision to keep rates unchanged earlier this morning (as expected). Draghi dropped no tape bombs in the press conference and markets haven't moved much at all from opening levels.

That also means that the stronger-than-expected Jobless Claims and narrower-than-expected Trade Deficit were of little consequence to bond markets, with the former most easily discounted due to Hurricane Sandy-related data distortions.

Instead of a discernible connection to data or events, bond market movements have been more driven by tradeflows in an ongoing "leveling-off" process following yesterday morning's big election-driven rally, as well as a need to be in position for this afternoon's 30yr Auction.

10yr yields are about 4.5 bps higher this morning, but not back into Tuesday's range. Still, 10's are pushing 1.69 at the moment, which is a technical support level of some importance. If 10's break above 1.69 with any meaningful momentum, we'd expect to see some spillover into MBS.

As for their part, MBS are doing their best to hang tough this AM with Fannie 3.0s down only 1 tick at 105-04 presently after having dipped to 105-01 earlier. There's no other scheduled data this morning, which leaves the door open for some concern about the stock market rally that is underway since the 9:30am cash open. For now, bond markets look to be holding their ground reasonably well and not overly keen to take part in a unified "risk-on" move before the Fed's Twist buying from 10:15-11:00am. There's probably a breaking point there if things get too heated, and it's coming up fairly soon if stocks break yesterday's afternoon highs.

- Trade gap shrinks to $41.55 bln from $43.79 bln previously
- Consensus was $45.0 bln

The U.S. Census Bureau and the U.S. Bureau of Economic Analysis, through the Department of Commerce, announced today that total September exports of $187.0 billion and imports of $228.5 billion resulted in a goods and services deficit of $41.5 billion, down from $43.8 billion in August, revised. September exports were $5.6 billion more than August exports of $181.4 billion. September imports were $3.4 billion more than August imports of $225.2 billion.

In September, the goods deficit decreased $1.4 billion from August to $57.5 billion, and the services surplus increased $0.8 billion from August to $15.9 billion. Exports of goods increased $5.4 billion to $134.0 billion, and imports of goods increased $3.9 billion to $191.5 billion. Exports of services increased $0.3 billion to $53.0 billion, and imports of services decreased $0.6 billion to $37.1 billion.

The goods and services deficit decreased $2.9 billion from September 2011 to September 2012. Exports were up $6.4 billion, or 3.5 percent, and imports were up $3.4 billion, or 1.5 percent.

- Claims 355k vs 370k Consensus, 363k Previous
- Continued Claims Lowest Since July 2008
- Labor Department Says Superstorm Sandy boosted claims in some states and depressed claims in at least one state.

In the week ending November 3, the advance figure for seasonally adjusted initial claims was 355,000, a decrease of 8,000 from the previous week's unrevised figure of 363,000. The 4-week moving average was 370,500, an increase of 3,250 from the previous week's unrevised average of 367,250.

The advance seasonally adjusted insured unemployment rate was 2.4 percent for the week ending October 27, a decrease of 0.1 percentage point from the prior week's unrevised rate. The advance number for seasonally adjusted insured unemployment during the week ending October 27 was 3,127,000, a decrease of 135,000 from the preceding week's revised level of 3,262,000. The 4-week moving average was 3,227,750, a decrease of 38,500 from the preceding week's revised average of 3,266,250.