"Rate sheet influential" MBS prices are being pulled to new 2011 price highs as Treasuries rally (into the 2.00% handle) in the wake of weak jobs and manufacturing data. The Fannie Mae 30yr 4.0 MBS coupon is currently +16/32 at 101-03 while the Ginnie Mae 4.0 coupon is +15/32 at 102-28. If your lock desk has not already released loan pricing it may be delayed until the market settles. If you've already received your rate sheet, it may be recalled and repriced for the better.

(Reuters) - U.S. construction spending rose in April to record the largest gain in six months, likely boosted by home renovations, but the prior month's outlays were revised down sharply, a government report showed on Wednesday. Construction spending increased 0.4 percent to an annual rate of $764.98 billion, the Commerce Department said. March's construction spending was revised to show a modest 0.1 percent increase rather than the previously reported 1.4 percent advance. Economists polled by Reuters had forecast construction spending rising 0.3 percent in April. Overall construction spending dropped 9.3 percent from a year ago. Private construction spending rose 1.7 percent as investment in residential projects climbed 3.1 percent to $232.13 billion, most likely because of an increase in renovations as housing starts fell sharply in April. Spending on new single family home construction fell 1.0 percent, while outlays on multifamily homes eased 0.1 percent in April. Private nonresidential outlays rose 0.5 percent. Spending on public construction fell 1.9 percent in April, with outlays on federal projects dropping 2.0 percent. Construction spending by state and local governments declined 1.9 percent. (Reporting by Lucia Mutikani, Editing by Andrea Ricci)

(Reuters) - The pace of growth in the U.S. manufacturing sector tumbled in May, slackening more than expected to its slowest since September 2009, according to an industry report released on Wednesday. The Institute for Supply Management (ISM) said its index of national factory activity fell to 53.5 in May from 60.4 the month before. The reading missed economists' expectations for 57.7. A reading below 50 indicates contraction in the manufacturing sector, while a number above 50 means expansion. New orders fell to 51.0 from 61.7 in April, the lowest since June 2009. The index for prices paid fell to 76.5 from 85.5, below expectations of 82.0. The data echoed earlier regional reports that showed softer manufacturing growth last month. (Reporting by Leah Schnurr, Editing by Chizu Nomiyama)

Loan pricing is set to improve by 12 to 25bps this morning after the ADP Private Payrolls survey indicated disappointing job growth in May. "Rate sheet influential" MBS coupon prices are up 5 to 8/32 and the benchmark 10yr note is testing psychological resistance at 3.00% as stock futures fall. While this report is not the "be all, end all" in terms of jobs data, it does provide a preview of things to come this Friday when the BLS releases the official Employment Situation Report.

The ADP Employment Report shows U.S. private payrolls increased by a disappointing 38,000 private sector jobs in May. This was well below economists' expectations for a gain of 175,000 jobs and is the lowest print since September 2010. From the release: A deceleration in employment, while disappointing, is not entirely surprising. In the first quarter, GDP grew at only a 1.8% rate and only about 2¼% over the last four quarters. This is below most economists’ estimates of the economy’s potential growth rate and normally would be associated with very weak growth of employment. While employment in the service-providing sector rose by 48,000, marking 17 consecutive months of employment gains, employment in the goods-producing sector fell 10,000 following six months of increases. Manufacturing employment fell 9,000 in May following seven consecutive monthly gains. Employment in the construction industry dropped 8,000 in May, completely reversing April’s increase. The total decrease in construction employment since its peak in January 2007 is 2,124,000. Employment in the financial services sector decreased 6,000 in May.

Mortgage applications decreased 4.0 percent from one week earlier, according to data from the Mortgage Bankers Association's Weekly Mortgage Applications Survey for the week ending May 27, 2011. The Market Composite Index, a measure of mortgage loan application volume, decreased 4.0 percent on a seasonally adjusted basis from one week earlier. The Refinance Index decreased 5.7 percent from the previous week. The seasonally adjusted Purchase Index was essentially unchanged from one week earlier. "Interest rates fell last week as incoming economic data was weaker than anticipated. Despite this drop in rates, the number of refinance applications fell. In fact, the last time mortgage rates were this low, refinance volume was more than twenty percent higher. It is likely that many borrowers still cannot qualify to refinance given the lack of equity in their homes," said Mike Fratantoni, MBA's Vice President of Research and Economics.

The pace of downsizing remained virtually unchanged in May, as U.S. employers announced plans to cut 37,135 positions from their payrolls during the month. That is just 1.8 percent more than the 36,490 job cuts in April, according to the report released Wednesday by global outplacement firm Challenger, Gray & Christmas, Inc. The May total was also about the same as a year ago, declining just 4.3 percent from the 38,810 job cuts announced in May 2010. May marks the third time this year and the tenth time in the last 14 months that announced job cuts totaled less than 40,000. Employers have now announced 204,374 job cuts in 2011, 21 percent fewer than the 258,319 planned layoffs reported in the first five months of 2010. The government and non-profit sector continues to dominate monthly job-cut announcements, with these employers reporting 14,755 in May or nearly 40 percent of all job cuts announced during the month. The May total was up 37 percent from April’s 10,371, but 11.6 percent lower than the 16,697 government job cuts announced in May 2010. Since January 2009, the government and non-profit sector has announced 380,523 job cuts.