MBS Live: MBS Morning Market Summary
It's no surprise to see bond markets trade into weaker territory following a significantly better-than-expected Employment Situation Report.  Non-Farm Payrolls, the report's key component, came in at +146k vs estimates of +93k based on surveyed economists and analysts.  On most occasions in the past, such a departure from the consensus would have resulted in a steeper bond market sell-off than we're seeing today.  10yr yields are just over 3bps higher and Fannie 3.0 MBS are down between an eighth and a quarter of a point depending on when you look (the marks at 11:05am below were the highs of the morning).  As discussed in this morning's note, some reaction was to be expected if the number was higher, but muted due to the other looming events in play.  Add to that the fact that BLS states that Hurricane Sandy didn't have an impact on data collection (as well as the negative revisions to the last two numbers), and the small amount of selling we've seen this morning is downright aggressive.  It speaks more to a technical bounce off recent highs and a set-up for next week's auctions and FOMC Announcement.
MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
FNMA 3.0
105-06 : -0-02
FNMA 3.5
106-25 : -0-01
FNMA 4.0
107-05 : -0-01
FNMA 4.5
107-28 : +0-01
GNMA 3.0
106-20 : -0-02
GNMA 3.5
108-22 : -0-01
GNMA 4.0
109-14 : -0-01
GNMA 4.5
109-10 : +0-02
104-28 : -0-02
106-11 : +0-00
106-20 : +0-01
107-05 : +0-03
Pricing as of 11:05 AM EST
Morning Reprice Alerts and Updates
Below is a recap of instant Reprice Alerts and updates issued via email and text alert to MBS Live subscribers this morning.

10:06AM  :  ECON: Consumer Sentiment Much Weaker Than Expected
- Headline Sentiment 74.5 vs 82.4 consensus
- Current Conditions 89.9 vs 91.0 consensus
- Expectations 64.6 vs 78.0 consensus
- 12 Month Outlook 75 vs 97 previous
- Expectations / Sentiment lowest since August

Survey Director Richard Curtin: ""Confidence plunged in early December as consumers confronted the rising likelihood that political gridlock would push the country over the fiscal cliff."
9:43AM  :  Relatively Contained Post-NFP Selling, Mid-Range Indecision
As expected, markets clearly reserved some level of reaction to Payrolls data despite what we suggested was an overdeveloped temptation to dismiss economic data that might be impacted by Hurricane Sandy. The BLS was kind enough to go out of their way to mention that Sandy had limited impact on their data collection, a fact that casts the 146k payrolls print in quite a different light (though not so different after last month's initial 171k was revised down to 138k). Combine it with another Labor Force Participation Rate drop that more than offsets the U/E drop and we're right back to "stagnant."

It would seem that bond markets have done their best to trade these realities back into the market after the obligatory knee-jerk sell-off. Both MBS and Treasuries came into the domestic session in relatively neutral territory after one of the quietest overnight sessions of the week. Fannie 3.0s sold a quick 3/8ths of a point before retracing about half of those losses ahead of the domestic stock market open.

10yr Treasuries didn't bounce back nearly as well, with the initial move taking them from 1.57's to 1.63+. They only retraced to mid 1.61's before rising back to high 1.62's ahead of the stock open and are currently in the process of fighting off a break above previous highs.

As long as Treasuries continue to fight off that technical break, it hearkens a stable enough intraday interest rate environment for MBS to hang on to their 'bounce back' levels, which, in terms of Fannie 3.0s is essentially 105-01 or higher. We're currently sitting at 105-02, which is 6 ticks lower from y'day, as stocks are moving lower slightly at the open. That said, we wouldn't count on a lock-step stock lever connection for the rest of the day--just looking for the most relevant near term guidance to help resolve the mid-range indecision.
8:46AM  :  ECON: NFP Much Stronger Than Expected, But BLS Says No Impact From Sandy
- NFP + 146 vs +93 Consensus
- October NFP revised to 138k from 171k
- Unemployment Rate 7.7% vs 7.9% Consensus
- Labor Force Participation Rate down 0.2 Pct, more than offsets U/E rate drop

Total nonfarm payroll employment rose by 146,000 in November, and the unemployment rate edged down to 7.7 percent, the U.S. Bureau of Labor Statistics reported today. Employment increased in retail trade, professional and business services, and health care.

"Hurricane Sandy made landfall on the Northeast coast on October 29th, causing severe damage in some states. Nevertheless, our survey response rates in the affected states were within normal ranges. Our analysis suggests that Hurricane Sandy did not substantively impact the national employment and unemployment estimates for November. BLS will release the regional and state estimates on December 21st. For additional information on how severe weather affects employment and unemployment data, see Question 8 in the Frequently Asked Questions section of this release."
Live Chat Featured Comments
A recap of the featured comments from the MBS Live Dashboard's Live Chat feature, utilized by hundreds of industry professionals each day.

Paul L. Martin  :  "If labor participation stayed steady,UE rate would be 8.0%"
Matthew Graham  :  "it's not catastrophic, to be sure. I think the trimming of the consensus was overdone due to Sandy. On the spectrum of "guessing vs knowing," survey respondents were closer to guessing when it came to Sandy impact (a fact that's now obvious). Plus, the establishment survey wasn't moved up on the calendar like the household survey was. So not only was the consensus probably irrelevant, we now KNOW it was because BLS straight up said "no impact." That leaves us in more equivocal, stagnant ter"
Paul L. Martin  :  "How about 542,000 dropped out of workforce?"
Scott Valins  :  "10 year not bouncing (yet)"
Oliver S. Orlicki  :  "Going to be a long friday"
Scott Valins  :  "revisions, revisions, revisions"
Victor Burek  :  "that helps explain u/e rate"
Matthew Graham  :  "RTRS- U.S. NOV JOBLESS RATE 7.7 PCT (CONSENSUS 7.9 PCT) VS OCT 7.9 PCT (PREV 7.9 PCT)"
Matthew Graham  :  "RTRS - US NOV PRIVATE SECTOR JOBS +147,000 (CONS +95,000) VS OCT +189,000 (PREV +184,000)"
Matthew Graham  :  "RTRS - U.S. NOV NONFARM PAYROLLS +146,000 (CONSENSUS +93,000) VS OCT +138,000 (PREV +171,000), SEPT +132,000 (PREV +148,000) "
Victor Burek  :  "happy nfp day"

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