Just a quick note that the ball has generally continued to bounce in our favor post-10yr-Auction. Treasuries consolidated more than MBS, but neither backed up much before pressing on with another few ticks of positivity. 10's haven't resoundingly challenged or broken resistance floors, but MBS have inched back into positive territory nonetheless.

There too, we're not seeing a resounding challenge of opening highs, let alone longer term pivot ceilings at 102-16, but the incremental improvement keeps positive reprice potential alive for some lenders. Fannie 3.0s are currently unchanged on the day at 102-13, and this is essentially the cut-off point the leaves the door slightly open for reprices (more of a "possibility" than "likelihood" though, for lenders who haven't already repriced). 10's are down to 2.0209 which is quite a nice change of pace from the 2.05 before the auction, but still a bit troubling considering it's merely flat vs yesterday's latest levels. S&P's hit 1556 for the third day in a row and are currently at 1554 with an hour to go before the close.

Today's 10yr Treasury Note Auction was much stronger...

This is more of an update than a statement about increasing reprice risk. It's conceivable that lenders who priced right at the mid-morning MBS highs were beginning to consider a reprice when Fannie 3.0s hit 102-07 moments ago (as this was a 4 tick gap from the previous high of 102-11). Even then, the earlier weakness this morning acts as a sort of insulator against this relatively smaller shock (first drop of the morning was 102-15 to 102-07).

In other words, lenders who priced just after 10am at the MBS Price highs had the benefit of "knowing where we came from" earlier in the morning and likely didn't price as if MBS had been flat at 102-11 all morning.

Additionally, the revisit to 102-07 has thus far, been met with a moderate bounce. It's only 1 tick for now, but the move is shared by Treasuries and stocks. These are probably good places to look in the next hour and a half as we head into the 10yr Auction. 10's have essentially revisited their highs of the morning at 2.05, and are currently at 2.0454. If they break higher, even if by way of a pre-auction concession, MBS could follow suit with a break of their lows, moderately increasing reprice risk.

With respect to those eventualities, "so far so good" for now, but just a heads up that we're close to the edge, and the assessment could change fairly quickly if near term technicals get tested.

- Inventories +1.0 vs +0.4 Consensus
- Sales -0.3 vs +0.1 in Dec
- Stock/Sales ratio 1.29 vs 1.28 in Dec
- Inventories rise is largest since May 2011

The U.S. Census Bureau announced today that the combined value of distributive trade sales and manufacturers’ shipments for January, adjusted for seasonal and trading-day differences but not for price changes, was estimated at $1,268.8 billion, down 0.3 percent (±0.3%)* from December 2012 and up 2.9 percent (±0.4%) from January 2012.

Manufacturers’ and trade inventories, adjusted for seasonal variations but not for price changes, were estimated at an end-of-month level of $1,642.2 billion, up 1.0 percent (±0.2%) from December 2012 and up 5.6 percent (±0.5%) from January 2012.

The total business inventories/sales ratio based on seasonally adjusted data at the end of January was 1.29. The January 2012 ratio was 1.26.

After a generally supportive overnight session, helped along by weaker Eurozone factory output and a weak Italian debt auction, domestic bond markets have done a complete 'about-face' following stronger-than-expected Retail Sales data (+1.1 % vs +0.5% Consensus). Economists/Analysts were widely expecting rising gas prices to provide a big boost, and while it did that, even the "excluding Gasoline" metrics were stronger.

10yr Treasuries had drifted down from just over 2.03 in the Asian session to just under 2.0 at the start of the domestic session and immediately moved up to 2.04 following the report MBS began the day a few ticks stronger and are now down 4 ticks at 102-09 vs 102-15 highs.

So far there is hope that we're now looking at a "leveling-off" scenario after coping with the first big hit from data, and the 2.04-2.05 area has been an important technical zone for 10yr Treasuries. If it holds through the domestic stock market open, MBS may well have found their lows at 102-07 at 8:50am. Whether or not it holds is still very much up in the air as we've been sideways near the weakest levels of the day for half an hour now.

Next major data is the 10yr Auction at 1pm though there is a report on Business Inventories out at 10am as well. A democratic budget proposal is also expected at some point during the session.

- Retail Sales +1.1 vs +0.5 Consensus
- Biggest increase since Sept 2012
- Excluding Gasoline +0.6 vs +0.2 in Jan
- Excluding Autos +1.0 vs +0.5 Consensus
- Market Reaction: Initial pop of selling, followed by some consolidation. Haven't re-broken lows yet, but getting close.

The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for February, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $421. 4 billion, an increase of 1.1 percent (±0.5%) from the previous month and 4.6 percent (±0.7%) above February 2012. Total sales for the December 2012 through February 2013 period were up 4.5 percent (±0.5%) from the same period a year ago. The December 2012 to January 2013 percent change was revised from +0.1 percent (±0.5%)* to +0.2 percent (±0.3%)*.

Retail trade sales were up 1.3 percent (±0.5%) from January 2013 and 4.7 percent (±0.8%) above last year. Nonstore retailers we re up 15.7 percent (±2.3%) from February 2012 and auto and other motor vehicle dealers were up 8.8 percent (±2.3%) from last year.

Just a quick note that the ball has generally continued to bounce in our favor post-10yr-Auction. Treasuries consolidated more than MBS, but neither backed up much before pressing on with another few ticks of positivity. 10's haven't resoundingly challenged or broken resistance floors, but MBS have inched back into positive territory nonetheless.

There too, we're not seeing a resounding challenge of opening highs, let alone longer term pivot ceilings at 102-16, but the incremental improvement keeps positive reprice potential alive for some lenders. Fannie 3.0s are currently unchanged on the day at 102-13, and this is essentially the cut-off point the leaves the door slightly open for reprices (more of a "possibility" than "likelihood" though, for lenders who haven't already repriced). 10's are down to 2.0209 which is quite a nice change of pace from the 2.05 before the auction, but still a bit troubling considering it's merely flat vs yesterday's latest levels. S&P's hit 1556 for the third day in a row and are currently at 1554 with an hour to go before the close.

Today's 10yr Treasury Note Auction was much stronger...

This is more of an update than a statement about increasing reprice risk. It's conceivable that lenders who priced right at the mid-morning MBS highs were beginning to consider a reprice when Fannie 3.0s hit 102-07 moments ago (as this was a 4 tick gap from the previous high of 102-11). Even then, the earlier weakness this morning acts as a sort of insulator against this relatively smaller shock (first drop of the morning was 102-15 to 102-07).

In other words, lenders who priced just after 10am at the MBS Price highs had the benefit of "knowing where we came from" earlier in the morning and likely didn't price as if MBS had been flat at 102-11 all morning.

Additionally, the revisit to 102-07 has thus far, been met with a moderate bounce. It's only 1 tick for now, but the move is shared by Treasuries and stocks. These are probably good places to look in the next hour and a half as we head into the 10yr Auction. 10's have essentially revisited their highs of the morning at 2.05, and are currently at 2.0454. If they break higher, even if by way of a pre-auction concession, MBS could follow suit with a break of their lows, moderately increasing reprice risk.

With respect to those eventualities, "so far so good" for now, but just a heads up that we're close to the edge, and the assessment could change fairly quickly if near term technicals get tested.

- Inventories +1.0 vs +0.4 Consensus
- Sales -0.3 vs +0.1 in Dec
- Stock/Sales ratio 1.29 vs 1.28 in Dec
- Inventories rise is largest since May 2011

The U.S. Census Bureau announced today that the combined value of distributive trade sales and manufacturers’ shipments for January, adjusted for seasonal and trading-day differences but not for price changes, was estimated at $1,268.8 billion, down 0.3 percent (±0.3%)* from December 2012 and up 2.9 percent (±0.4%) from January 2012.

Manufacturers’ and trade inventories, adjusted for seasonal variations but not for price changes, were estimated at an end-of-month level of $1,642.2 billion, up 1.0 percent (±0.2%) from December 2012 and up 5.6 percent (±0.5%) from January 2012.

The total business inventories/sales ratio based on seasonally adjusted data at the end of January was 1.29. The January 2012 ratio was 1.26.

After a generally supportive overnight session, helped along by weaker Eurozone factory output and a weak Italian debt auction, domestic bond markets have done a complete 'about-face' following stronger-than-expected Retail Sales data (+1.1 % vs +0.5% Consensus). Economists/Analysts were widely expecting rising gas prices to provide a big boost, and while it did that, even the "excluding Gasoline" metrics were stronger.

10yr Treasuries had drifted down from just over 2.03 in the Asian session to just under 2.0 at the start of the domestic session and immediately moved up to 2.04 following the report MBS began the day a few ticks stronger and are now down 4 ticks at 102-09 vs 102-15 highs.

So far there is hope that we're now looking at a "leveling-off" scenario after coping with the first big hit from data, and the 2.04-2.05 area has been an important technical zone for 10yr Treasuries. If it holds through the domestic stock market open, MBS may well have found their lows at 102-07 at 8:50am. Whether or not it holds is still very much up in the air as we've been sideways near the weakest levels of the day for half an hour now.

Next major data is the 10yr Auction at 1pm though there is a report on Business Inventories out at 10am as well. A democratic budget proposal is also expected at some point during the session.

- Retail Sales +1.1 vs +0.5 Consensus
- Biggest increase since Sept 2012
- Excluding Gasoline +0.6 vs +0.2 in Jan
- Excluding Autos +1.0 vs +0.5 Consensus
- Market Reaction: Initial pop of selling, followed by some consolidation. Haven't re-broken lows yet, but getting close.

The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for February, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $421. 4 billion, an increase of 1.1 percent (±0.5%) from the previous month and 4.6 percent (±0.7%) above February 2012. Total sales for the December 2012 through February 2013 period were up 4.5 percent (±0.5%) from the same period a year ago. The December 2012 to January 2013 percent change was revised from +0.1 percent (±0.5%)* to +0.2 percent (±0.3%)*.

Retail trade sales were up 1.3 percent (±0.5%) from January 2013 and 4.7 percent (±0.8%) above last year. Nonstore retailers we re up 15.7 percent (±2.3%) from February 2012 and auto and other motor vehicle dealers were up 8.8 percent (±2.3%) from last year.

- Inventories +1.0 vs +0.4 Consensus
- Sales -0.3 vs +0.1 in Dec
- Stock/Sales ratio 1.29 vs 1.28 in Dec
- Inventories rise is largest since May 2011

The U.S. Census Bureau announced today that the combined value of distributive trade sales and manufacturers’ shipments for January, adjusted for seasonal and trading-day differences but not for price changes, was estimated at $1,268.8 billion, down 0.3 percent (±0.3%)* from December 2012 and up 2.9 percent (±0.4%) from January 2012.

Manufacturers’ and trade inventories, adjusted for seasonal variations but not for price changes, were estimated at an end-of-month level of $1,642.2 billion, up 1.0 percent (±0.2%) from December 2012 and up 5.6 percent (±0.5%) from January 2012.

The total business inventories/sales ratio based on seasonally adjusted data at the end of January was 1.29. The January 2012 ratio was 1.26.

- Retail Sales +1.1 vs +0.5 Consensus
- Biggest increase since Sept 2012
- Excluding Gasoline +0.6 vs +0.2 in Jan
- Excluding Autos +1.0 vs +0.5 Consensus
- Market Reaction: Initial pop of selling, followed by some consolidation. Haven't re-broken lows yet, but getting close.

The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for February, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $421. 4 billion, an increase of 1.1 percent (±0.5%) from the previous month and 4.6 percent (±0.7%) above February 2012. Total sales for the December 2012 through February 2013 period were up 4.5 percent (±0.5%) from the same period a year ago. The December 2012 to January 2013 percent change was revised from +0.1 percent (±0.5%)* to +0.2 percent (±0.3%)*.

Retail trade sales were up 1.3 percent (±0.5%) from January 2013 and 4.7 percent (±0.8%) above last year. Nonstore retailers we re up 15.7 percent (±2.3%) from February 2012 and auto and other motor vehicle dealers were up 8.8 percent (±2.3%) from last year.