MBS Pricing Snapshot

The overnight session largely represented a circling of the wagon as Treasuries avoided breaking any higher or lower than the highs and lows seen before and after Yellen's prepared remarks yesterday afternoon. That connotes a range of roughly 2.734 to 2.706 in 10yr yields.

The morning's economic data resulted in moderate improvement for bond markets, briefly testing the lower end of that range, but we're now breaking out the other side with 10's up to 2.737 ahead of the domestic stock market open.

MBS opened just a few ticks weaker than yesterday afternoon's ballistic closing levels. They underwent the same sparkle and fade seen in Treasuries and are now 3 ticks lower at 101-04 in Fannie 3.5s.

There are no remaining economic reports this morning and Yellen's confirmation hearing begins at 10am. This will likely start with plenty of inconsequential senatorial droning as well as Yellen's prepared remarks released yesterday. At some point in the 10am hour, the actually relevant Q&A period should begin.

- Trade Deficit $41.78 bln vs $39 bln forecast
- Exports -0.2, imports +1.2, both unchanged previously
- Trade gap largest since May
- Slightly negative connotation for growth; potentially beneficial to bond markets.

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 $188.9 billion and imports of $230.7 billion resulted in a goods and services deficit of $41.8 billion, up from $38.7 billion in August, revised. September exports were $0.4 billion less than August exports of $189.3 billion. September imports were $2.7 billion more than August imports of $228.0 billion.

- Productivity +1.9 vs +2.2 forecast
- Labor Costs -0.6 vs +0.2 forecast
Nonfarm business sector labor productivity increased at a 1.9 percent annual rate during the third quarter of 2013, the U.S. Bureau of Labor Statistics reported today. The increase in productivity reflects increases of 3.7 percent in output and 1.7 percent in hours worked. (All quarterly percent changes in this release are seasonally adjusted annual rates.) From the third quarter of 2012 to the third quarter of 2013, productivity was unchanged as a 1.8 percent increase in output was matched by a 1.8 percent increase in hours worked.

Labor productivity, or output per hour, is calculated by dividing an index of real output by an index of hours worked of all persons, including employees, proprietors, and unpaid family workers.

Unit labor costs in nonfarm businesses decreased 0.6 percent in the third quarter of 2013, while hourly compensation increased 1.3 percent. Unit labor costs rose 1.9 percent over the last four quarters.

BLS defines unit labor costs as the ratio of hourly compensation to labor productivity; increases in hourly compensation tend to increase unit labor costs and increases in output per hour tend to reduce them.

- Claims 339k vs 330k forecast
- Previous week revised to 341k from 336k
- Continued Claims 2.874m vs 2.87m forecast
- Market Reaction: Bond markets slightly stronger so far.

In the week ending November 9, the advance figure for seasonally adjusted initial claims was 339,000, a decrease of 2,000 from the previous week's revised figure of 341,000. The 4-week moving average was 344,000, a decrease of 5,750 from the previous week's revised average of 349,750. The advance seasonally adjusted insured unemployment rate was 2.2 percent for the week ending November 2, unchanged from the prior week's unrevised rate. The advance number for seasonally adjusted insured unemployment during the week ending November 2 was 2,874,000, unchanged from the preceding week's revised level of 2,874,000. The 4-week moving average was 2,866,250, a decrease of 2,000 from the preceding week's revised average of 2,868,250.