MBS Pricing Snapshot

*Inventories +0.3 vs +0.6 consensus
* Sales +0.5 vs +0.7 consensus
* Petroleum Inventories down 5.9 pct, most since May 2010

The U.S. Census Bureau announced today that March 2012 sales of merchant wholesalers, except manufacturers’ sales branches and offices, after adjustment for seasonal variations and trading-day differences but not for price changes, were $411.1 billion, up 0.5 percent (+/-0.7)* from the revised February level and were up 6.5 percent (+/-1.2%) from the March 2011 level. The February preliminary estimate was revised downward $0.4 billion or 0.1 percent. March sales of durable goods were down 0.6 percent (+/-1.1%)* from last month, but were up 7.8 percent (+/-1.2%) from a year ago. Sales of nondurable goods were up 1.5 percent (+/-0.7%) from February and were up 5.5 percent (+/-1.4%) from last March. Sales of farm product raw materials were up 4.3 percent from last month and sales of petroleum and petroleum products were up 2.7 percent.

Total inventories of merchant wholesalers, except manufacturers’ sales branches and offices, after adjustment for seasonal variations but not for price changes, were $480.4 billion at the end of March, up 0.3 percent (+/-0.4%)* from the revised February level and were up 8.4 percent (+/- 1.2%) from the March 2011 level. The February preliminary estimate was virtually unchanged. March inventories of durable goods were up 1.0 percent (+/-0.4%) from last month and were up 10.8 percent (+/-1.6%) from a year ago. Inventories of lumber and other construction materials were up 2.1 percent from last month and inventories of machinery, equipment, and supplies were up 1.6 percent. Inventories of nondurable goods were down 0.6 percent (+/-0.5%) from February, but were up 5.1 percent (+/-1.4%) from last March. Inventories of petroleum and petroleum products were down 5.9 percent from last month and inventories of paper and paper products were down 2.0 percent. Inventories/Sales Ratio.

The March inventories/sales ratio for merchant wholesalers, except manufacturers’ sales branches and offices, based on seasonally adjusted data, was 1.17. The March 2011 ratio was 1.15.

♫ Greece and Spain and Spain and Greece ♫... Word has it that this will be the next hit song debuting on Glee, and we just wanted you to know they got the idea bond markets, which have been singing that tune on many-a-morning over the past 7 months.

Today is no exception as the bailout needs for Spain's banking sector grow ever larger and Greek political drama continues to disturb more than it entertains.

There are no major surprises out of Greece though Tsipras (the guy who wants to proactively renege on EU/IMF bailout conditions) is meeting with the less-insane leaders of the other political parties in an attempt to set up a new coalition government. The fact that he's preconditioning the meeting on their agreement to join him in his quest to disavow previous austerity agreements (thus plunging the country into an inescapable vortex of doom and destruction, we're sure) has many onlookers doubting he'll make much progress.

There are really no major surprises out of Spain either. The fact that Spain's banking sector continues to get more and more dire attention is very much to-be-expected by many market participants. The latest developments include Spain increasing loan-loss-reserve requirements for its banks, leading to the expectation that Spain will need bailout funding, and soon.

All of the above pushed Greek and Spanish sovereign debt yields rapidly wider to European Benchmarks and helped fuel a bid for US Treasuries into the domestic session. 10yr yields came within a few small bps of the 1/31/12 low of 1.792% and are currently trading in the mid 1.80's. Fannie 3.5 MBS touched new all-time highs earlier this morning, but only by half a tick vs y'day.

Production MBS continue to be painful to watch as they're mercilessly pushed up and ground against the ceiling in the low 104's. Normally, such a ceiling would be like filter of some sort, allowing for a logical diffusion of bid-side demand to work it's way toward the next most aggressive coupon. But because 3.0's are no-mans-land, that ceiling in 3.5's is more like a cheese-grater. A little bit of the positivity makes it through with each new push, but most of it gets mutilated and falls back into the bowl.