MBS Pricing Snapshot

- Sentiment 75.1 vs 73.5 forecast
- Current Conditions 88.0 vs 89.0 forecast
- expectations 66.8 vs 66.2 forecast
- 12-month outlook 79 vs 72 previously
- Market Reaction: covered in previous alert.

(Reuters) - U.S. consumer sentiment rose in November as wealthier Americans' outlook on the economy improved, a survey released on Wednesday showed.

The Thomson Reuters/University of Michigan's final reading on the overall index on consumer sentiment measured 75.1 for November, up from a final reading of 73.2 in October and above the median forecast of 73.5 among economists polled by Reuters.

"While rising stock prices and low interest rates will favor holiday sales of upper-end consumers, lower income households were still more concerned about job gains," survey director Richard Curtin said in a statement.

The preliminary November reading of the overall index was reported at 72.0 earlier this month.

The survey's barometer of current economic conditions fell to 88.0 in November from 89.9 in October. The final figure was higher than the preliminary November reading of 87.2 but came in below a forecast of 89.0.

If your lender was already out with rates before Consumer Sentiment and Chicago PMI, negative reprices are possible as MBS have fallen the better part of a quarter point. Fannie 3.5s are down 8 ticks on the day at 100-30 and 10yr yields have spiked from 2.71 to 2.74 in short order.

Just a quick heads up here between PMI and Consumer Sentiment data (which will either help bookend the range or accelerate the losses) that MBS are now back to their lows of the day and Treasuries are already into new high yields.

- PMI 63.0 vs 60.0 forecast, 65.9 previously
- Employment Index 60.9 vs 57.7 previously
- Market Reaction: as tends to be the case with Chicago PMI, a good amount of the market reaction was seen just before the official release of the data because ISM subscribers receive it (and trade on it!) 3 minutes early. As such, a spiky movement at 9:42am is usually a giveaway. In this case, the stronger data is resulting in weaker bond markets.

The November Chicago Business Barometer softened to 63.0 after October’s sharp rise to a 31-month high of 65.9. November’s slight correction came amid mild declines in New Orders, Production and Order Backlogs after double digit gains in the prior month.

Despite November’s weakening, the Barometer remained well above 60 for the second month, pushing the three month moving average to the highest level since November 2011.

Chicago area purchasers continued to report healthy expansion in New Orders and Order Backlogs, albeit at a slower rate, as well as a lengthening in Supplier Delivery Times.

Employment was up for the second consecutive month, reaching the highest level since October 2011, and the first time above 60 since February 2012.

keep in mind that subscribers get the data early, so the run up in tsy yields is an early clue that it's stronger (probably).

Treasuries drifted moderately higher in yield overnight for no exciting reasons, finally hitting the domestic session at 2.718 in 10's. MBS opened just below yesterday's narrow range and moved into weaker territory along with Treasuries.

The reaction to the 8:30am data was a bit paradoxical. We'd been ready to discount Jobless Claims due to seasonality and focus on Durable Goods more than usual. Claims were stronger and Durables were weaker, which should have been good for bond markets under that scenario. Instead, MBS kept falling and Treasury yields kept rising at least for about 1 minute (which is actually a long time to be moving in the wrong direction after what seems like fairly straightforward economic data).

Whatever the case, bonds came to their senses to some extent, and turned the corner at 8:31am. Fannie 3.5s scratched back to within 1 tick of unchanged after being as much as 5 ticks weaker. 10yr yiels moved down from 2.727 to 2.716 currently. There is some resistance here at the 21-day moving average (mid bollinger band for those following along with the periodic technical charts in the blog posts), and it will probably take some rather compelling economic data at 9:45-9:55am if that's to change.

- Oct Durable Goods -2.0 vs -1.9 forecast
- Oct Excluding Transportation -0.1 vs +0.5 forecast
- Sept ex-transportation revised to +0.2 from -0.2
- Market Reaction: offsets the strength in Jobless Claims, helping bond markets hold ground.

New orders for manufactured durable goods in October decreased $4.6 billion or 2.0 percent to $230.3 billion, the U.S. Census Bureau announced today. This decrease, down following two consecutive monthly increases, followed a 4.1 percent September increase. Excluding transportation, new orders decreased 0.1 percent. Excluding defense, new orders decreased 1.3 percent.

Transportation equipment, also down following two consecutive monthly increases, led the decrease, $4.6 billion or 5.9 percent to $73.0 billion. This was led by nondefense aircraft and parts, which decreased $3.0 billion.

- Claims 316k vs 330k forecast
- Continued Claims 2.776 mln vs 2.853 mln
- Market Reaction: putting pressure on bond markets(more to follow in AM update.

In the week ending November 23, the advance figure for seasonally adjusted initial claims was 316,000, a decrease of 10,000 from the previous week's revised figure of 326,000. The 4-week moving average was 331,750, a decrease of 7,500 from the previous week's revised average of 339,250.

The advance seasonally adjusted insured unemployment rate was 2.1 percent for the week ending November 16, 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 November 16 was 2,776,000, a decrease of 91,000 from the preceding week's revised level of 2,867,000. The 4-week moving average was 2,831,750, a decrease of 22,750 from the preceding week's revised average of 2,854,500.