MBS continue to diverge from broader bond markets as...

Highlights from Minutes of the most recent FOMC Meeting on October 23-24

• A number of participants in FED'S October meeting thought more asset buys would likely needed after operation twist ends--FOMC minutes
• Several FOMC participants questioned effectiveness of asset purchases or whether more purchases warranted if moderate growth sustained
• FOMC participants generally favored use of economic thresholds to replace calendar date in forward guidance-minutes
• Participants offered differing views on whether quantitative or qualitative thresholds would be most effective-minutes
• FED policymakers generally thought QE3 had produced a marked easing in financial conditions-minutes
• Many FED policymakers saw uncertainty over us fiscal cliff and Europe restraining U.S. growth in coming months-minutes
• Minutes say many FED business contacts said they were delaying hiring and spending because of Fiscal Cliff
• A few FOMC participants indicated low rates could increase demand for risky assets that could lead to imprudent risk taking
• Many members of policy committee saw fed forward guidance on interest rates as effective tactic-minutes
• FED explored consensus forecasts based on individual policymaker views, but most felt it would be difficult to agree-minutes

As we mentioned in the morning alert, the business...

After opening at the lowest levels in a week, MBS have...

- Inventories +0.7 vs +0.5 consensus
- Sales +1.4 pct vs +0.6 pct in August

The U.S. Census Bureau announced today that the combined value of distributive trade sales and manufacturers’ shipments for September, adjusted for seasonal and trading-day differences but not for price changes, was estimated at $1,263.9 billion, up 1.4 percent (±0.2%) from August 2012 and up 4.4 percent (±0.4%) from September 2011.

Manufacturers’ and trade inventories, adjusted for seasonal variations but not for price changes, were estimated at an end-of-month level of $1,612.9 billion, up 0.7 percent (±0.1%) from August 2012 and up 6.2 percent (±0.4%) from September 2011.

Inventories/Sales Ratio. The total business inventories/sales ratio based on seasonally adjusted data at the end of September was 1.28. The September 2011 ratio was 1.25.

Despite weaker-than-expected Retail Sales and lower...

- Headline PPI -0.2 vs +0.2 consensus, +1.1 in Sept
- Core PPI -0.2 vs +0.1 consensus, biggest drop since Oct 2010

The Producer Price Index for finished goods declined 0.2 percent in October, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Prices for finished goods increased 1.1 percent in September and 1.7 percent in August. At the earlier stages of processing, prices received by manufacturers of intermediate goods edged down 0.1 percent in October, and the crude goods index moved up 0.9 percent. On an unadjusted basis, the finished goods index advanced 2.3 percent for the 12 months ended October 2012, the largest rise since a 2.8-percent increase for the 12 months ended March 2012.

- Retail Sales down -0.3 pct vs -0.2 pct consensus and +1.3 pct in September. Markets expected weaker results as the end of October was impacted by Hurricane Sandy, but even when the most affected sectors are factored out, the results were still weaker-than-expected.

The Commerce department noted the effects of the Hurricane, but said those effects cannot be isolated and had received indications of both positive and negative effects on sales.

The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for October, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $411.6 billion, a decrease of 0.3 percent (±0.5%)* from the previous month, but 3.8 percent (±0.7%) above October 2011. Total sales for the August through October 2012 period were up 4.7 percent (±0.5%) from the same period a year ago. The August to September 2012 percent change was revised from 1.1 percent (±0.5%) to 1.3 percent (±0.2%).

Retail trade sales were down 0.3 percent (±0.5%)* from September 2012, but 3.8 percent (±0.8%) above last year. Gasoline stations sales were up 7.7 percent (±1.7%) from October 2011 and nonstore retailers were up 7.2 percent (±3.0%) from last year.

MBS continue to diverge from broader bond markets as...

Highlights from Minutes of the most recent FOMC Meeting on October 23-24

• A number of participants in FED'S October meeting thought more asset buys would likely needed after operation twist ends--FOMC minutes
• Several FOMC participants questioned effectiveness of asset purchases or whether more purchases warranted if moderate growth sustained
• FOMC participants generally favored use of economic thresholds to replace calendar date in forward guidance-minutes
• Participants offered differing views on whether quantitative or qualitative thresholds would be most effective-minutes
• FED policymakers generally thought QE3 had produced a marked easing in financial conditions-minutes
• Many FED policymakers saw uncertainty over us fiscal cliff and Europe restraining U.S. growth in coming months-minutes
• Minutes say many FED business contacts said they were delaying hiring and spending because of Fiscal Cliff
• A few FOMC participants indicated low rates could increase demand for risky assets that could lead to imprudent risk taking
• Many members of policy committee saw fed forward guidance on interest rates as effective tactic-minutes
• FED explored consensus forecasts based on individual policymaker views, but most felt it would be difficult to agree-minutes

As we mentioned in the morning alert, the business...

After opening at the lowest levels in a week, MBS have...

- Inventories +0.7 vs +0.5 consensus
- Sales +1.4 pct vs +0.6 pct in August

The U.S. Census Bureau announced today that the combined value of distributive trade sales and manufacturers’ shipments for September, adjusted for seasonal and trading-day differences but not for price changes, was estimated at $1,263.9 billion, up 1.4 percent (±0.2%) from August 2012 and up 4.4 percent (±0.4%) from September 2011.

Manufacturers’ and trade inventories, adjusted for seasonal variations but not for price changes, were estimated at an end-of-month level of $1,612.9 billion, up 0.7 percent (±0.1%) from August 2012 and up 6.2 percent (±0.4%) from September 2011.

Inventories/Sales Ratio. The total business inventories/sales ratio based on seasonally adjusted data at the end of September was 1.28. The September 2011 ratio was 1.25.

Despite weaker-than-expected Retail Sales and lower...

- Headline PPI -0.2 vs +0.2 consensus, +1.1 in Sept
- Core PPI -0.2 vs +0.1 consensus, biggest drop since Oct 2010

The Producer Price Index for finished goods declined 0.2 percent in October, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Prices for finished goods increased 1.1 percent in September and 1.7 percent in August. At the earlier stages of processing, prices received by manufacturers of intermediate goods edged down 0.1 percent in October, and the crude goods index moved up 0.9 percent. On an unadjusted basis, the finished goods index advanced 2.3 percent for the 12 months ended October 2012, the largest rise since a 2.8-percent increase for the 12 months ended March 2012.

- Retail Sales down -0.3 pct vs -0.2 pct consensus and +1.3 pct in September. Markets expected weaker results as the end of October was impacted by Hurricane Sandy, but even when the most affected sectors are factored out, the results were still weaker-than-expected.

The Commerce department noted the effects of the Hurricane, but said those effects cannot be isolated and had received indications of both positive and negative effects on sales.

The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for October, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $411.6 billion, a decrease of 0.3 percent (±0.5%)* from the previous month, but 3.8 percent (±0.7%) above October 2011. Total sales for the August through October 2012 period were up 4.7 percent (±0.5%) from the same period a year ago. The August to September 2012 percent change was revised from 1.1 percent (±0.5%) to 1.3 percent (±0.2%).

Retail trade sales were down 0.3 percent (±0.5%)* from September 2012, but 3.8 percent (±0.8%) above last year. Gasoline stations sales were up 7.7 percent (±1.7%) from October 2011 and nonstore retailers were up 7.2 percent (±3.0%) from last year.

- Inventories +0.7 vs +0.5 consensus
- Sales +1.4 pct vs +0.6 pct in August

The U.S. Census Bureau announced today that the combined value of distributive trade sales and manufacturers’ shipments for September, adjusted for seasonal and trading-day differences but not for price changes, was estimated at $1,263.9 billion, up 1.4 percent (±0.2%) from August 2012 and up 4.4 percent (±0.4%) from September 2011.

Manufacturers’ and trade inventories, adjusted for seasonal variations but not for price changes, were estimated at an end-of-month level of $1,612.9 billion, up 0.7 percent (±0.1%) from August 2012 and up 6.2 percent (±0.4%) from September 2011.

Inventories/Sales Ratio. The total business inventories/sales ratio based on seasonally adjusted data at the end of September was 1.28. The September 2011 ratio was 1.25.

- Headline PPI -0.2 vs +0.2 consensus, +1.1 in Sept
- Core PPI -0.2 vs +0.1 consensus, biggest drop since Oct 2010

The Producer Price Index for finished goods declined 0.2 percent in October, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Prices for finished goods increased 1.1 percent in September and 1.7 percent in August. At the earlier stages of processing, prices received by manufacturers of intermediate goods edged down 0.1 percent in October, and the crude goods index moved up 0.9 percent. On an unadjusted basis, the finished goods index advanced 2.3 percent for the 12 months ended October 2012, the largest rise since a 2.8-percent increase for the 12 months ended March 2012.

- Retail Sales down -0.3 pct vs -0.2 pct consensus and +1.3 pct in September. Markets expected weaker results as the end of October was impacted by Hurricane Sandy, but even when the most affected sectors are factored out, the results were still weaker-than-expected.

The Commerce department noted the effects of the Hurricane, but said those effects cannot be isolated and had received indications of both positive and negative effects on sales.

The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for October, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $411.6 billion, a decrease of 0.3 percent (±0.5%)* from the previous month, but 3.8 percent (±0.7%) above October 2011. Total sales for the August through October 2012 period were up 4.7 percent (±0.5%) from the same period a year ago. The August to September 2012 percent change was revised from 1.1 percent (±0.5%) to 1.3 percent (±0.2%).

Retail trade sales were down 0.3 percent (±0.5%)* from September 2012, but 3.8 percent (±0.8%) above last year. Gasoline stations sales were up 7.7 percent (±1.7%) from October 2011 and nonstore retailers were up 7.2 percent (±3.0%) from last year.

Highlights from Minutes of the most recent FOMC Meeting on October 23-24

• A number of participants in FED'S October meeting thought more asset buys would likely needed after operation twist ends--FOMC minutes
• Several FOMC participants questioned effectiveness of asset purchases or whether more purchases warranted if moderate growth sustained
• FOMC participants generally favored use of economic thresholds to replace calendar date in forward guidance-minutes
• Participants offered differing views on whether quantitative or qualitative thresholds would be most effective-minutes
• FED policymakers generally thought QE3 had produced a marked easing in financial conditions-minutes
• Many FED policymakers saw uncertainty over us fiscal cliff and Europe restraining U.S. growth in coming months-minutes
• Minutes say many FED business contacts said they were delaying hiring and spending because of Fiscal Cliff
• A few FOMC participants indicated low rates could increase demand for risky assets that could lead to imprudent risk taking
• Many members of policy committee saw fed forward guidance on interest rates as effective tactic-minutes
• FED explored consensus forecasts based on individual policymaker views, but most felt it would be difficult to agree-minutes