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FNMA 3.5
103-04 : +0-02
FNMA 4.0
105-02 : +0-00
FNMA 4.5
106-11 : -0-01
FNMA 5.0
107-25 : +0-00
GNMA 3.5
104-24 : +0-04
GNMA 4.0
107-23 : +0-02
GNMA 4.5
108-29 : -0-01
GNMA 5.0
110-10 : -0-01
102-29 : +0-02
104-25 : +0-01
106-01 : -0-02
107-15 : +0-00
Pricing as of 11:02 AM EST
Morning Market Updates
A recap of MBS Market Updates provided by MND Analysts and streamed live to the MBS Live Dashboard.
10:50AM  :  ECON: Wholesale Inventory Growth Slows, Sales Turn Negative
Wholesale Inventories and Sales data printed at 10am and as expected, has been almost exclusively ignored. This is evident not only in the absence of discernible changes in volume around that time, but also the fact that the market continued trading negatively in bonds and positively in stocks despite the weaker than expected report.

Inventory growth essentially flattened out, rising 0.4 pct this month versus 1.1% in the previous month. Forecasts called for 0.6 pct growth today.

The sales component fell 0.1 pct versus a previous reading of +1.3 pct and an estimate for today of +0.8 pct. That marks the first decline in Wholesale Sales since May 2011 when they declined at a -0.3 pct pace.
9:18AM  :  ALERT: MBS Turn Positive After NFP Knee-Jerk, In Terms of Post-Roll Prices
Fannie 3.5's went out the door yesterday at 103-13, rolling to April Coupons which came in the door at 103-03. This morning's better-than-expected NFP caused a brief (very brief) whipsaw of negative price action for MBS, but since then, Fannie 3.5's slowly and steadily ticked into positive territory at 103-05.

10yr yields made it into the high 2.05's in the post-NFP volatility and are now back down into the 2.02's.

Things were quiet overnight with no major reaction to any of the more official Greek PSI tallies (85%+ organic, 95%+ with CACs, 5% apparently immune from CACs). Markets are probably more interested in whether or not CACs will be activated (they probably will be) and whether or not that will constitute a "credit event" that triggers CDS payouts. Both of those unknown's will be decided as early as today by meetings of the Eurogroup regarding invocation of CACs and the ISDA regarding "credit event" classification. And yes, that's all Greek to us.

The International Trade data out at the same time as NFP, despite being the widest gap since 2008, was and is a non-event in terms of market movement compared to NFP. It's roughly in line with the trend since 2009, so "widest gap since 2009" will continue to be a common theme as long as the trend continues. Nothing to get excited about even if it sounds exciting.

As to whether or not bond markets will be able to hold onto this attempt at bouncing back, we're watching levels in the mid 2.04's in 10yr notes for several reasons. Anything around or under there by this afternoon would be a major reinforcement of the long term trends and a decent set up for MBS next week. Keep in mind that the auction cycle starts up again next week though, so there may be some early preparation needs exerting some phantom pressure on bond markets today.
9:01AM  :  Freddie Mac Report Q4 and 2011 Financials, Net Loss $5.3B in 2011
-Fourth quarter 2011 net income of $619 million and total other comprehensive income of $887 million resulted in total comprehensive income of $1.5 billion.

-Net worth deficit at December 31, 2011 requires Treasury draw request of $146 million, as total comprehensive income for the fourth quarter was more than offset by senior preferred dividends paid of $1.7 billion.

-Full-year 2011 net loss was $5.3 billion and total comprehensive loss was $1.2 billion. Net worth deficits during 2011 resulted in total Treasury draw requests of $7.6 billion for the year, reflecting the total comprehensive loss for the year and $6.5 billion of senior preferred dividends paid in 2011.

-In 2011, the company provided over $360 billion of liquidity to the mortgage market, helping nearly 1.9 million families finance or rent a home. This included nearly $250 billion in single-family refinance volume, resulting in an estimated $2.7 billion in aggregate annual interest savings for almost 1.2 million borrowers.

-In 2011, the company helped over 208,000 borrowers avoid foreclosure, with approximately eight out of ten of these borrowers keeping their homes.

-New single-family business acquired after 2008 continues to demonstrate strong credit quality and now represents over 50 percent of the company’s single-family credit guarantee portfolio.

-Single-family serious delinquency rate was 3.58 percent at December 31, 2011, remaining substantially below industry benchmarks.
8:52AM  :  ECON: Trade Gap Widest Since October 2008

* Trade Deficit $52.57 Bln (Consensus $49.00 Bln)
* Dec Deficit revised up to $50.42 Bln (Prev $48.80 Bln)
* Exports +1.4 Pct Vs Dec +0.4 Pct
* Imports +2.1 Pct Vs Dec +1.6 Pct
* Goods Deficit $67.48 Bln, Services Surplus $14.92 Bln
* Exports $180.81 Bln Vs Dec $178.23 Bln
* Imports Record High $233.37 Bln Vs Dec $228.65 Bln
*Capital Goods Imports Record High $44.73 Bln Vs Dec Imports $44.68 Bln
*US/China Deficit $26.02 Bln Vs Dec Deficit $23.14 Bln
*OPEC Jan Trade Deficit $10.02 Bln Vs Dec Deficit $9.10 Bln
*Oil Import Price $103.81/Bbl Vs Dec $104.13/Bbl
* Oil Up +23.1 Pct From Jan'11 $84.34/Bbl
*Trade Deficit Widest Since Oct 2008 ($59.5 Bln)

The U.S. Census Bureau and the U.S. Bureau of Economic Analysis, through the Department of Commerce, announced today that total January exports of $180.8 billion and imports of $233.4 billion resulted in a goods and services deficit of $52.6 billion, up from $50.4 billion in December, revised. January exports were $2.6 billion more than December exports of $178.2 billion. January imports were $4.7 billion more than December imports of $228.7 billion.

In January, the goods deficit increased $2.4 billion from December to $67.5 billion, and the services surplus increased $0.3 billion from December to $14.9 billion. Exports of goods increased $1.9 billion to $128.6 billion, and imports of goods increased $4.3 billion to $196.1 billion. Exports of services increased $0.7 billion to $52.2 billion, and imports of services increased $0.4 billion to $37.3 billion.

The goods and services deficit increased $5.0 billion from January 2011 to January 2012. Exports were up $12.9 billion, or 7.7 percent, and imports were up $18.0 billion, or 8.4 percent.
8:46AM  :  ECON: NFP Slightly Higher Than Expected, Healthy Upward Revisions

* Nonfarm Payrolls +227k (est. 210,000)
* Jan revised to284k from 243k
* Dec revised to 223k from 203k
* Private Sector Jobs +233k (est. 225k)
* Government Jobs -6,000
* Jobless Rate 8.3 Pct (Consensus 8.3 Pct)
* Labor Force Participation Rate 63.9 (up 0.2)
* factory jobs +31k (cons. +25k) vs jan +52k

Slightly better than expected headline NFP is a relative non-issue in this month's report compared to the healthy revisions of the previous months.

The fact that labor participation rate actually rose by 0.2 removes some of the ammunition that the naysayers would normally use to dismiss a positive employment report. Granted, the labor market is far from "fixed" and far from "healthy," but the relatively recent theme of marginal improvement continues.

Full Report From the BLS:
Featured Market Discussion
A recap of the featured comments from the Live Discussion on the MBS Live Dashboard.
Matthew Graham  :  "conclusion: holding under that level reinforces intermediate-term sideways trend."
Matthew Graham  :  "2.1287, 2.404, 1.9516, and 1.8426. All have come into play as significant pivot points (meaning yields have been more likely to bounce when approaching these levels than to break through, assuming we give such an assertion a small measure of overrun with the "test/confirmation" point of view. In other words, yes, yields cross these levels, but those crosses constitute "tests." Unless they cross for a certain amount of time and by a certain amount (varies by analyst opinion), we have no confir"
Matthew Graham  :  "That gives us the framework to examine the fibonacci multiples at 23, 38, 50, and 62%"
Matthew Graham  :  "with 1.67% clearly on the other end"
Matthew Graham  :  "the day before the FOMC meeting in early August, the high was 2.438. reinforcing a use of the 2.42/2.43 yield zone as one end of the spectrum"
Matthew Graham  :  "September 23rd, 10yr yields hit 1.67+ and 10/28, they hit 2.42"
Matthew Graham  :  "not only due to that FOMC announcement, but also the coinciding trauma in the Euro-zone, I feel like this is the most appropriate version of "the modern economic era." I've heard other analysts and traders reference retracements based on this time frame as well."
Matthew Graham  :  "in other words, what is my 0% level going to be? In this case, I'm particularly interested in the era following the August FOMC announcement when the "2013 verbiage" was first unveiled. "
Matthew Graham  :  "Then it becomes a question of "where do I set the starting point for my Fibonacci sequence? "
Matthew Graham  :  "whether someone believes in that witchcraft or not, the fact is that enough of the market pays attention to retracement levels that we do tend to see more floor/ceiling bounces as prices or yields approach fibonacci levels"
Matthew Graham  :  "Start with a crash course on Fibonacci retracements: http://www.investopedia.com/ask/answers/05/FibonacciRetracement.asp "
Joe Prine  :  "** MG Can you explain the 50% retrace line? Thanks."
Matthew Graham  :  "always"
Joe Ridings  :  "32nds?"
Matthew Graham  :  "10 ticks "
Joe Ridings  :  "how much pricing did the roll account for? i am trying to figure out what aour new 104 level is"
Matthew Graham  :  "yeah"
Tony Cardinal  :  "Sry late. Roll?"
MMNJ  :  "very resilient MBS market"
Andy Pada  :  "I don't think it is going to be ugly"
Jude Bridwell  :  "Going to be an ugly day "
Andy Pada  :  "looks like we are going to be range bound"
Matthew Graham  :  "RTRS - U.S. FEB JOBLESS RATE 8.3 PCT (CONSENSUS 8.3 PCT) VS JAN 8.3 PCT (PREV 8.3 PCT) "
Victor Burek  :  "large revisions better"
Matthew Graham  :  "RTRS - U.S. FEB NONFARM PAYROLLS +227,000 (CONSENSUS +210,000) VS JAN +284,000 (PREV +243,000), DEC +223,000 (PREV +203,000)"
Andy Pada  :  "cash window now down those same 12 - 15 bps"
Andy Pada  :  "fannie mae and freddie mac's lock window - live pricing - open ups at 8:15"
Michael Kelleher  :  "explain cash window Andy"
Andy Pada  :  "FYI: cash window better by 12 - 15 bps from last night's close"
Victor Burek  :  "depending on where you look"
Victor Burek  :  "210k"
B-C  :  "i think 8.3 and 220k???"
Andy Pada  :  "what are the forecasts for UE rate and payrolls?"
Dan Clifton  :  "roll on nfp day, is that like an eclipse"
Sung Kim  :  "the less you bet the more you lose when you win"
B-C  :  "not much to gain by floating"
Matt Hodges  :  "better to have locked when you should have floated than the reverse"
B-C  :  "well if UE dissapoints and rates improve, thats good for April's loans"
Matthew Graham  :  "noticeable shift in lock bias this week"