MBS Live: MBS Morning Market Summary
We've been discussing the past few days in the context of the Gorilla Analogy.  If you did catch this morning's commentary, it's even more timely (Jobs Report to Read Verdict on December Taper Risk).  At a glance, it said that bond traders were like refugees of a city that apparently came under attack by a giant gorilla.  The city represented 'low rates' or bond-market positivity.  The gorilla represented a potentially strong jobs report.

The refugees (traders) couldn't be sure the gorilla was a real threat until this morning, but they weren't going to stick around in town (lower rates) to find out, just in case.   By Thursday, traders were already so far out of town that it was going to take the realization of a very big gorilla indeed in order to cause any further retreat from low rates.

Now today, with private payrolls coming in only 16k higher than expected, the gorilla was just about as big as traders were prepared for.  As such, we see 10yr yields 0.001 changed on the day.  And then there's MBS, which have been battered and bruised of late, breathing a bigger sigh of relief this morning and actually crawling back into positive territory.

For the sake of perspective, if MBS closed right here at the highs of the day, they'd be right in line with Wednesday's close that followed the big ADP and ISM-inspired sell-off--the one that had gapped lower from the four consecutive weaker closes--and still the second lowest close since September's "no taper" Fed Announcement.  This isn't to rain on the parade, but see the parade for what it is: a nice little battle victory in a war that we're still losing and will probably continue to lose unless something changes, and significantly.
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
95-20 : +0-12
FNMA 3.5
100-01 : +0-10
FNMA 4.0
103-21 : +0-08
FNMA 4.5
106-18 : +0-08
GNMA 3.0
96-25 : +0-14
GNMA 3.5
101-05 : +0-10
GNMA 4.0
104-13 : +0-07
GNMA 4.5
107-04 : +0-07
FHLMC 3.0
95-06 : +0-12
FHLMC 3.5
99-26 : +0-11
FHLMC 4.0
103-12 : +0-09
FHLMC 4.5
106-11 : +0-07
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.
10:19AM  :  ECON: Consumer Sentiment Stronger Than Expected
- Sentiment 82.5 vs 76.0 forecast
- Current conditions 97.9 vs 90.0 forecast
- Both at highest levels since July
- Market Reaction: traders are probably discounting a lot of this positivity due to gas prices. Bond markets head-faked toward weaker territory but are now at better levels than those seen before the data.

(Reuters) - U.S. consumer sentiment surged in December as Americans' outlook on the economy and job prospects improved, a survey released on Friday showed.

The Thomson Reuters/University of Michigan's preliminary reading on the overall index on consumer sentiment jumped to 82.5 for December, up from a final reading of 75.1 in November. This was the highest reading for the index since July, and topped analyst forecasts for a reading of 76.

"All of the improvement was among households with incomes below $75,000, with upper income households showing no gain from last month’s reading," survey director Richard Curtin wrote in a statement.
9:01AM  :  NFP Losses Almost Completely Reversed Now!
As strange and wonderful as it is to consider, Fannie 4.0s just turned green on the day and 10yr Treasuries are close to doing the same. Maybe they will. Maybe they won't. Either way, this is a much stronger showing for bond markets than you'd ever expect after a 20k+ beat on an important NFP.

The potential reasons for this have been excessively discussed in this week's commentary, but in general have to do with the pace of the selling pressure over the past few weeks as well as the outright levels being near the upper end of the yield range in benchmark Treasuries.

In other words, bond markets were set up defensively for the potential of a stronger-than-expected report, thus limiting the damage.
8:55AM  :  ECON: Employment Situation Much Stronger Than Expected


RTRS - U.S. NOV NONFARM PAYROLLS +203,000 (CONSENSUS +180,000) VS OCT+200,000 (PREV +204,000), SEPT +175,000 (PREV +163,000)

RTRS - U.S. NOV JOBLESS RATE 7.0 PCT, LOWEST SINCE NOV 2008 (CONSENSUS 7.2 PCT) VS OCT 7.3 PCT (PREV 7.3 PCT)

RTRS - U.S. LABOR FORCE PARTICIPATION RATE 63.0 PCT IN NOV VS 62.8 PCT IN OCT

RTRS - US NOV PRIVATE SECTOR JOBS +196,000 (CONS +180,000), OCT +214,000 (PREV +212,000)

RTRS - U.S. NOV GOVERNMENT JOBS +7,000 VS OCT -14,000 (PREV -8,000)

RTRS - U.S. NOV AVERAGE HOURLY EARNINGS ALL PRIVATE WORKERS +0.2 (CONS +0.2 PCT) VS OCT +0.1 PCT (PREV +0.1 PCT), TO $24.15 VS OCT $24.11; NOV YEAR-ON-YEAR EARNINGS +2.0 PCT

RTRS - U.S. NOV AVERAGE WORKWK ALL PRIVATE WORKERS 34.5 HRS (CONS 34.5 HRS) VS OCT 34.4 HRS (PREV 34.4 HRS), FACTORY 41.0 VS 40.9, OVERTIME 3.5 VS 3.4

RTRS - U.S. NOV FACTORY JOBS +27,000 (CONS. +10,000) VS OCT +16,000 (PREV +19,000)

RTRS - U.S. NOV GOODS-PRODUCING JOBS +44,000, CONSTRUCTION +17,000, PRIVATE SERVICE-PROVIDING JOBS +152,000, RETAIL +22,300

RTRS - U.S. NOV AGGREGATE WEEKLY HOURS INDEX FOR ALL PRIVATE WORKERS +0.5 PCT VS OCT +0.1 PCT The unemployment rate declined from 7.3 percent to 7.0 percent in November, and total nonfarm payroll employment rose by 203,000, the U.S. Bureau of Labor Statistics reported today. Employment increased in transportation and warehousing, health care, and manufacturing.
8:33AM  :  ALERT ISSUED: First Move is Lower After NFP
Payrolls came in at 203k vs 180k forecast. Bond markets are selling off. Fannie 4.0s are down 7 ticks at 99-17 and 10yr yields popped up to 2.92 in the first few moments after the release. More to follow.
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.
Matt Hodges  :  "morning pricing on WF is 0-.125 worse. anyone see if WF has suspended on a RP?"
Matthew Graham  :  ""we've sold off at a healthy clip in recent weeks (really it's been since Halloween, but with a few days off in mid November). That will hopefully mean that bond markets can weather a moderate 'beat' without freaking right out. ""
Erik Grimmer  :  "Today is just weird"
Steven M. Sims  :  "I'm happy with my week. I locked my DEC pipe on Monday, not sorry, but I get to eat my cake too, because at least it's not just tanking. Once again my monthly subscription to MBS Live pays off, AND ... I got quoted on CNBC :)"
Michael Gillani  :  "Great call MG on the meet/slight beat already priced in! I floated 1 on that thought process because my borrower and I agreed with it!"
Andy Pada  :  "nice call yesterday, MG"
Paul Philbin  :  "Like MG said. We might be far enough from the city to not worry about the gorilla "
Erik Grimmer  :  "Mg.....why do you think the mbs and treasuries are coming back some? "
Oliver Orlicki  :  "range is coming into play"
FPH  :  "First move lower, but not as bad as I would have thought. "
Matthew Graham  :  "RTRS- US NOV PRIVATE SECTOR JOBS +196,000 (CONS +180,000), OCT +214,000 (PREV +212,000) "
Matthew Graham  :  "we'll see at 3pm I guess. I'm not convinced based on the headline"
Oliver Orlicki  :  "well there goes that"
Christopher Stevens  :  "that's is why floating was silly"
Matthew Graham  :  "RTRS- U.S. NOV JOBLESS RATE 7.0 PCT, LOWEST SINCE NOV 2008 (CONSENSUS 7.2 PCT) VS OCT 7.3 PCT (PREV 7.3 PCT) "
Matthew Graham  :  "RTRS- U.S. NOV NONFARM PAYROLLS +203,000 (CONSENSUS +180,000) VS OCT+200,000 (PREV +204,000), SEPT +175,000 (PREV +163,000) "
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