MBS Live: MBS Morning Market Summary
Even though yesterday's session wasn't technically "weak" between the open and close, it was definitely weaker day-over-day, as has been the case for every session so far this week.  But the pervasive theme is that MBS have been significantly stronger than Treasuries on a relative basis.  Whereas Treasuries have lost a lot, MBS have only lost a little.  That same theme continues today with MBS hanging around unchanged levels while Treasuries are a few bps higher in longer-dated maturities.  Unlike most recent sessions, today actually saw economic data  have a material impact on trading!  That's a major departure from the recent Fiscal Cliff dominance, though it was unfriendly for bond markets, which had been trading in stronger territory until the 8:15am ADP Employment numbers (much stronger than expected).  We found our footing fairly quickly but began drifting weaker again after stock markets found their own footing 10 minutes into the domestic session.  Since then, 10yr yields have been battling with a technical ceiling around 1.86 while Fannie 3.0 MBS do their best to hold a 104-19 to 104-20 floor.  Both are currently under pressure and should be watched carefully.
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
104-20 : +0-00
FNMA 3.5
106-15 : -0-01
FNMA 4.0
107-05 : +0-00
FNMA 4.5
108-03 : +0-02
GNMA 3.0
106-02 : -0-01
GNMA 3.5
108-17 : +0-01
GNMA 4.0
109-20 : -0-01
GNMA 4.5
109-17 : +0-01
104-11 : +0-00
106-07 : -0-01
106-23 : +0-01
107-11 : +0-03
Pricing as of 11:06 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.

10:47AM  :  Equities And Europe Applying Some Pressure On Bond Markets
Fannie 3.0's are still hovering between 104-19 and 104-21, but along with Treasuries, have been under some pressure since about 9:15. Some of the weakness coincides with equities markets that turned the corner about 10 minutes into the cash session. S&Ps fell just over 4 points at the open, but gained it all back by 10:30. A "risk-on" move in Europe contributed to higher stock prices and higher bond yields.

At the highest levels, 10yr yields crested the 1.86 technical level, though have currently backed off just slightly, now sitting at 1.8583. Fannie 3.0s are still definitely outperforming, but definitely feeling the pressure, well off earlier highs at 104-23. We just got a few brief forays into 104-19 territory, but are back up at 104-20 for now. Things seem a bit volatile and we're definitely playing defense here with benchmark 10's up against the ceiling.

A lender would have had to have priced quite early in the session and be quite jumpy in order to be considering a negative reprice, but it's not completely out of the realm of possibility. If we saw a sustained break below 104-18, then risks would increase, but SO FAR, it looks like we're holding our ground.
9:20AM  :  MBS Outperform While 10's Bounce At Range Boundary (Again)
Everything has been fairly cut and dry so far this morning. The overnight session was non-existent at first with Asian markets closed for New Year Holidays still and European trading relatively muted. Both 10yr yields and MBS crossed the 8am mark in just slightly stronger territory than yesterday's latest levels, but within the session's respective trading ranges.

Morning trading so far has delivered on expectations in several ways:

- ADP's Employment Report was the focal point, where much stronger-than-expected private payroll creation sent bond markets into a bit of an early morning tail-spin.

- But mitigating the tail-spin were a few other familiar fuzzy blankets, the first of which being the increasingly reliable 1.86% support level for 10yr yields (hit it y'day, hit it again after ADP) though this makes it less of a warm fuzzy whenever it's broken.

- Also familiar is recent MBS outperformance. Case in point, Fannie 3.0s are 4 ticks into the green while 10yr yields are still half a bp higher on the morning. Or if we want to look at things relative to y'day's ranges, MBS are just poking their head above y'day's highs while 10yr yields are right in the middle of their range.

Bottom line, factoring out absentee Asian markets, volume continues to demonstrate "back to business" levels, and bond markets continue to trade the range, while MBS continue to outperform. ADP data was obviously a mini-shock, but not a big enough one to confirm a breakout of the aforementioned range. Results may vary after NFP tomorrow morning or with unforeseen headline tape-bombs today, but otherwise, so far so good for confirming that the "pre-fiscal-cliff-deal" range is the same as the "post-fiscal-cliff-deal range."

Next up:
- Fed Treasury buying at 10:15
- FOMC Minutes at 2:00pm
8:34AM  :  ECON: Jobless Claims Slightly Lower Than Expected
- Claims 372k vs 363k Consensus, 350k Previous
- 4-Week Average up to 360k from 359,7650
- Continued Claims up to 3.245 mln from 3.201 mln
- Market Reaction: Helping bond markets dig in a bit against ADP-related selling. MBS just now ticked back to unchanged on the day. 10yr yields still struggling to avoid break above 1.86

In the week ending December 29, the advance figure for seasonally adjusted initial claims was 372,000, an increase of 10,000 from the previous week's revised figure of 362,000. The 4-week moving average was 360,000, an increase of 250 from the previous week's revised average of 359,750.

The advance seasonally adjusted insured unemployment rate was 2.5 percent for the week ending December 22, unchanged from the prior week's unrevised rate. The advance number for seasonally adjusted insured unemployment during the week ending December 22 was 3,245,000, an increase of 44,000 from the preceding week's revised level of 3,201,000. The 4-week moving average was 3,224,250, an increase of 6,500 from the preceding week's revised average of 3,217,750.
8:23AM  :  ECON: ADP Employment Data Much Stronger Than Expected
- Private Payrolls up 215k vs 133k Consensus
- Previous report revised to 148k from 118k
- Market Reaction: Surge in volume and selling in Treasuries taking 10yr yields up 2bps in the minute following the release. 10's bounced at 1.85 at first, pulled back, and moved back above 1.85. MBS pulled back 3-4 ticks briefly, bounced, but are back to -2 on the day at 104-18

Private sector employment increased by 215,000 jobs from November to December, according to the December ADP National Employment Report which is produced by Automatic Data Processing, Inc. (ADP a leading provider of human capital management solutions, in collaboration with Moody’s Analytics. The report, which is derived from ADP’s actual payroll data, measures the change in total nonfarm private employment each month on a seasonally-adjusted basis. The November 2012 report, which reported job gains of 118,000, was revised upward by 30,000 to 148,000 jobs.
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.

Matthew Graham  :  "RTRS - US JOBLESS CLAIMS 4-WK AVG ROSE TO 360,000 DEC 29 WEEK FROM 359,750 PRIOR WEEK (PREVIOUS 356,750) "
Matthew Graham  :  "RTRS- US JOBLESS CLAIMS ROSE TO 372,000 DEC 29 WEEK FROM 362,000 PRIOR WEEK (PREVIOUS 350,000) "
B-C  :  "215,000 is a lot of jobs, i guess tomorrow will be 300k or so?"
Matthew Graham  :  "RTRS - US ADP NOVEMBER PAYROLL CHANGE REVISED TO 148,000 FROM 118,000 "
Jeff Anderson  :  "It's like realtors, I work with a select few. That helps the relationship. Try to match the personalities with the clients and CPA. "
Jeff Anderson  :  "GM, all. I'd think that CPA's would be a good source for 2013 as we should be able to trade business back and forth, especially with the new cliff deal and all the changes in the tax code."
Mike Drews  :  "-CPA's want to be seen as trusted advisors...just like us...So when you have a borrower in front of you that asks as tax question, don't answer it yourself..give teh tax adviser the chance to shine."
Thomas Quann  :  "TY MD......I email mine rates everyday from Jan to Apr and make sure I talk with him a few times during the peek season without being too interruptive cause they are busy. I feel like its that "Out of site, out of mind" theory so with me I remind him everyday what rates are. This way when he's working on someone's file my email is front and center. That's what has worked for me.....simple as rates everyday."
Thomas Quann  :  "Jeff Statz.....are you referring to what they need from you in order to send referrals or what they need from you come tax time for your personal taxes?"

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