The morning has been pretty straightforward so far with a relatively positive overnight session getting a lift from weaker European economic data and a weaker-than-expected Italian debt auction (unlike US debt auctions, weaker auctions in the European periphery are beneficial to German/US yields and other "core" countries that can benefit from safe-haven buying). 10yr yields had edged down just under 2% by the start of the domestic session before stronger-than-expected Retail Sales caused a moderate but quick op up to 2.04. MBS experienced the drama as a drop from 102-15 to 102-07. Things have been sideways and grindy since then with 10's hanging out within a bp of 2.04 on either side and Fannie 3.0s within 2 ticks of 102-09 on either side. Next major consideration is the 10yr Treasury Auction coming up at 1pm.
MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing
is available via MBS Live.
Pricing as of 11:04 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
ECON: Business Inventories Rise Faster Than Expected
- Inventories +1.0 vs +0.4 Consensus
- Sales -0.3 vs +0.1 in Dec
- Stock/Sales ratio 1.29 vs 1.28 in Dec
- Inventories rise is largest since May 2011
The U.S. Census Bureau announced today that the combined value of distributive trade sales and manufacturers’
shipments for January, adjusted for seasonal and trading-day differences but not for price changes, was estimated at
$1,268.8 billion, down 0.3 percent (±0.3%)* from December
2012 and up 2.9 percent (±0.4%) from January 2012.
Manufacturers’ and trade inventories, adjusted for seasonal variations but not for price changes, were estimated
at an end-of-month level of $1,642.2 billion, up 1.0 percent (±0.2%) from December 2012 and up 5.6 percent (±0.5%) from
The total business inventories/sales ratio based on seasonally adjusted data at the end of January was
1.29. The January 2012 ratio was 1.26.
Bond Markets Weaker After Retail Sales Beats Estimates
After a generally supportive overnight session, helped along by weaker Eurozone factory output and a weak Italian debt auction, domestic bond markets have done a complete 'about-face' following stronger-than-expected Retail Sales data (+1.1 % vs +0.5% Consensus). Economists/Analysts were widely expecting rising gas prices to provide a big boost, and while it did that, even the "excluding Gasoline" metrics were stronger.
10yr Treasuries had drifted down from just over 2.03 in the Asian session to just under 2.0 at the start of the domestic session and immediately moved up to 2.04 following the report MBS began the day a few ticks stronger and are now down 4 ticks at 102-09 vs 102-15 highs.
So far there is hope that we're now looking at a "leveling-off" scenario after coping with the first big hit from data, and the 2.04-2.05 area has been an important technical zone for 10yr Treasuries. If it holds through the domestic stock market open, MBS may well have found their lows at 102-07 at 8:50am. Whether or not it holds is still very much up in the air as we've been sideways near the weakest levels of the day for half an hour now.
Next major data is the 10yr Auction at 1pm though there is a report on Business Inventories out at 10am as well. A democratic budget proposal is also expected at some point during the session.
ECON: Retail Sales Much Stronger Than Expected
- Retail Sales +1.1 vs +0.5 Consensus
- Biggest increase since Sept 2012
- Excluding Gasoline +0.6 vs +0.2 in Jan
- Excluding Autos +1.0 vs +0.5 Consensus
- Market Reaction: Initial pop of selling, followed by some consolidation. Haven't re-broken lows yet, but getting close.
The U.S. Census Bureau announced today that advance estimates of
U.S. retail and food services sales for February, adjusted for
variation and holiday and trading-day differences, but not for price changes, were $421.
4 billion, an increase of 1.1 percent
(±0.5%) from the
previous month and 4.6 percent (±0.7%)
above February 2012. Total sales for the
December 2012 through February 2013 period were up 4.5
percent (±0.5%) from the same period a year ago. The December 2012 to January 2013 percent change was revised from +0.1 percent
(±0.5%)* to +0.2 percent (±0.3%)*.
Retail trade sales were up 1.3 percent (±0.5%) from January 2013 and
4.7 percent (±0.8%) above last year. Nonstore retailers we
re up 15.7
percent (±2.3%) from February 2012 and auto and other motor vehicle dealers were up 8.8 percent (±2.3%) from last year.
Live Chat Featured Comments
Oliver S. Orlicki : "I agree Gus. We would something major to cause us to get back down our recent range. "
Matthew Graham : "RTRS - U.S. JAN BUSINESS INVENTORIES +1.0 PCT (CONSENSUS +0.4 PCT) VS DEC +0.3 PCT (PREV +0.1 PCT) "
Gus Floropoulos : "I think reality is telling us to get acquainted with 2+ 10YR"
Niccolo Satullo : "I would imagine a sluggish start today will have no changes in pricing today from most. "
Ted Rood : "Beppe could be our very good friend if he plays his cards right."
Victor Burek : "Beppe Grillo had some headlines earlier about italy already out of eu"
Victor Burek : "the unadjusted retail sales showed a decline "
Steve Chizmadia : "I think partially is an understatement "
Blair J. Beard : "I heard on the radio this morning the increase was partially due to higher gas prices."
Steve Chizmadia : "Futures in equities don't seem to think the retail sales number is a big deal."
Steve Chizmadia : "I think we see a good auction today"
Jeff Anderson : "Just setting up for a good 10 year auction to turn the ship around. Right? MG? Right? Anyone?"
Brent Borcherding : "We'll see where we are after the auction. Only down 4 right now basically at the same place sheets came out yesterday. "
Brayden Alexander : "Wow. Yesterday's gains gone pretty quickly"
Steve Chizmadia : "All things considered, MBS and TSY markets are doing much better than I would have expexted with how strong the sales data was. I cnsider that a win. Still hoping and thinking we have a pretty strng auction today as well. "
Jeff Anderson : "I guess people were shopping, just not at Walmart."
Jeff Anderson : "We've had a couple of 1.1's since 2011. If next month beats....look out. We seem to taper off, as far as retails sales goes, after a good number like this."
Brayden Alexander : "Back to green. Headlines fade fast lately and we continue to hold strong (relatively)"
Christopher Stevens : "2.05 please hold and remain our ceiling"
rford : "and ust like that the green has vanished"
Matthew Graham : "RTRS- US FEB CARS/PARTS SALES +1.1 PCT VS JAN -0.3 PCT "
Matthew Graham : "here's the kicker: RTRS- US FEB EX-GASOLINE SALES +0.6 PCT VS JAN +0.2 PCT "
Matthew Graham : "RTRS- US FEB RETAIL SALES EX-AUTOS/GAS/BUILDING MATERIALS +0.4 PCT (CONS +0.2 PCT) VS JAN +0.3 PCT (PREV +0.1 PCT) "
Matthew Graham : "RTRS - US FEB RETAIL SALES +1.1 PCT, LARGEST RISE SINCE SEPT 2012, (CONSENSUS +0.5 PCT) VS JAN +0.2 PCT (PREV +0.1 PCT) "