MBS Live: MBS Morning Market Summary
Bond markets kicked off the day in unchanged-to-weaker territory, extending yesterday's post-FOMC losses.  Economic data actually made a dent with lower-than-expected Jobless Claims and strong internal components in the Retail Sales report.  We got a bit of a technical bounce heading into end of the Fed's Twist buying operation at 11am--essentially stopping the bleeding.  Since then, Boehner's comments on the Fiscal Cliff situation have helped equities continue to sell-off, though it looks like they're already trying to bounce. 10yr yields moved moderately lower with stocks and are subsequently moderately in tune with the bounce. 10's had a chance to break back below the mid 1.71's technical level and failed in a very clearly delineated fashion, not once, but twice. That's the line in the sand for broader bond markets at the moment and one that's not likely to be crossed without the help of a mostly awesome 30yr Bond Auction at 1pm.  Fannie 3.0 MBS have their own technical resistance at 104-22 after having bounced off 104-16 support.
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
104-18 : -0-06
FNMA 3.5
106-14 : -0-03
FNMA 4.0
107-01 : -0-01
FNMA 4.5
107-24 : -0-02
GNMA 3.0
106-00 : -0-06
GNMA 3.5
108-14 : -0-03
GNMA 4.0
109-08 : -0-01
GNMA 4.5
109-07 : +0-02
104-08 : -0-06
106-03 : -0-03
106-17 : -0-01
106-31 : +0-00
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.

10:45AM  :  ALERT ISSUED: MBS Hit New Lows Of the Morning As Treasuries Leak Higher
MBS have been doing a decent job of holding onto sideways support at their previous lows of 104-16. They're not doing a terrible job of trying to stay there, but have slipped a bit in recent minutes after increasing pressure from broader bond markets.

The tenor there is "up and up" in terms of yields with 10's continuing a steady leak higher all morning--and very much in line with yesterday's post-FOMC series of highs. 10's are currently up another 3.5 bps vs yesterday at 1.7368.

MBS continue to hold up relatively better than Treasuries with 3.0s down only 7 ticks on the day, at the moment, at 104-17 after getting a decent bounce off the 104-14 lows of the morning just now.

For lenders that priced around the 9:30 time frame, we haven't seen sufficient losses to warrant excessive negative reprice risk. That said, negative reprices can't be ruled out completely in this situation as there's a clearly negative trend in play from yesterday afternoon.

The risks are more developed with a sustained break below 104-16.

Next up: 30yr auction at 1pm
10:06AM  :  ECON: Wholesale Inventories As Expected, Sales Weaker
- Inventories +0.4 vs +0.4 consensus, +0.7 previous
- Sales -0.4 vs +1.2 previous

The U.S. Census Bureau announced today that the combined value of distributive trade sales and manufacturers’ shipments for October, adjusted for seasonal and trading-day differences but not for price changes, was estimated at $1,257.7 billion, down 0.4 percent (±0.2%) from September 2012 and up 3.1 percent (±0.4%) from October 2011.

Manufacturers’ and trade inventories, adjusted for seasonal variations but not for price changes, were estimated at an end-of-month level of $1,619.2 billion, up 0.4 percent (±0.1%) from September 2012 and up 5.7 percent (±0.4%) from October 2011.

The total business inventories/sales ratio based on seasonally adjusted data at the end of October was 1.29. The October 2011 ratio was 1.26.
9:12AM  :  Bond Markets Holding In Weaker Territory After Morning Data
Even though it has led to slightly negative prices, there's been a refreshing amount of connectivity between market movements and economic events OTHER than Fiscal Cliff headlines. Yesterday it was the Fed and this morning it's the data.

While the later is nowhere near the former in terms of impact, it did serve to slightly reinforce/confirm the selling trend in bond markets starting around 6:30am this morning. Before that, Treasuries had a choppy overnight session with 10's first moving lower into the 1.6's and then rising to 1.72 into European hours. Throughout the course course of the European session, German Bunds helped pull Treasury yields back into the 1.6's, but 10's were only able to play that game for so long before getting back to their new favorite game: "selling pressure following significant events."

First it was NFP Friday that marked the bottom of the recent yield range, and then of course, FOMC yesterday provided an even bigger ratcheting movement upward in yield. Traders are going with that flow to a large extent this morning and the fact that Retail Sales had strong internals and Jobless Claims were the lowest in 2 months is not helping.

Bond markets briefly paused at moderately weaker levels following the data, but have since devolved, with 10's up to 1.7178 and Fannie 3.0 MBS down 4 ticks on the morning after opening unchanged. The only other economic report this morning is Business Inventories at 10am. Then the last of the week's Treasury Auctions arrives at 1pm with 30yr Bonds.
8:41AM  :  ECON: Producer Prices Fall On Lower Energy Prices
- PPI -0.8 vs -0.5 Consensus
- Core PPI +0.1 vs +0.2 Consensus
- Energy PPI -4.6, biggest drop since March 2009. Gas -10.1.
- No substantive impact from Sandy - Labor Dept.The Producer Price Index for finished goods fell 0.8 percent in November, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Prices for finished goods decreased 0.2 percent in October and rose 1.1 percent in September. At the earlier stages of processing, prices received by manufacturers of intermediate goods declined 1.2 percent in November, and the crude goods index edged up 0.1 percent. On an unadjusted basis, the finished goods index advanced 1.5 percent for the 12 months ended November 2012, the smallest increase since a 0.5- percent rise for the 12 months ended July 2012.
8:38AM  :  ECON: Retail Sales Turn Positive, Only Weighed Down By Gas
- Headline Sales +0.3 vs +0.5 consensus, -0.3 previous
- Excluding Gasoline +0.8 vs -0.5 previous
- Commerce Dept says no impact from Sandy

The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for November, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $412.4 billion, an increase of 0.3 percent (±0.5%)* from the previous month and 3.7 percent (±0.7%) above November 2011. Total sales for the September through November 2012 period were up 4.3 percent (±0.5%) from the same period a year ago. The September to October 2012 percent change was unrevised from -0.3 percent (±0.2%).

Retail trade sales were up 0.2 percent (±0.5%)* from October 2012 and 3.4 percent (±0.8%) above last year. Nonstore retailers were up 11.1 percent (±2.8%) from November 2011 and sporting goods, hobby, book and music stores were up 7.1 percent (±4.8%) from last year.
8:35AM  :  ECON: Jobless Claims Back Under Pre-Sandy Levels
- 343k vs 370k consensus, only minor revision to previous week from 370k to 372k

In the week ending December 8, the advance figure for seasonally adjusted initial claims was 343,000, a decrease of 29,000 from the previous week's revised figure of 372,000. The 4-week moving average was 381,500, a decrease of 27,000 from the previous week's revised average of 408,500.

The advance seasonally adjusted insured unemployment rate was 2.5 percent for the week ending December 1, unchanged from the prior week's unrevised rate. The advance number for seasonally adjusted insured unemployment during the week ending December 1 was 3,198,000, a decrease of 23,000 from the preceding week's revised level of 3,221,000. The 4-week moving average was 3,270,750, a decrease of 42,250 from the preceding week's revised average of 3,313,000.
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.

Victor Burek  :  "i think we rallied nicely after last 30yr auction"
Matthew Graham  :  "if we have to cope with weakness, better to do so before rate sheets, and yeah, post-30yr auction is a good opportunity for a bounce, maybe the best opportunity to hold the line at the boundaries of a moderate sell-off as opposed to something that takes us back to 1.85 in 10s and low 104's in Fannie 30s. that's where the supportive areas of the longer term ranges are."
Victor Burek  :  "hopefully when the 30yr auction is done we can get some gains"
Matthew Graham  :  "RTRS - U.S. NOV PPI EXFOOD/ENERGY +0.1 PCT (CONS +0.2 PCT) VS OCT -0.2 PCT "
Matthew Graham  :  "RTRS- U.S. NOV PPI -0.8 PCT (CONSENSUS -0.5 PCT), VS OCT -0.2 PCT "
Matthew Graham  :  "RTRS - US NOV EX-GASOLINE SALES +0.8 PCT VS OCT -0.5 PCT "
Matthew Graham  :  "RTRS - US NOV RETAIL SALES +0.3 PCT (CONSENSUS +0.5 PCT) VS OCT -0.3 PCT (PREV -0.3 PCT)"

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