Good Morning. Jobless Claims and retail sales data have been released.

In the week ending June 6, Initial Jobless Claims  were 601,000, a decrease of 24,000 from the previous week's revised read of 625,000 (revised from 621,000). The four week moving average of initial jobless claims moved to 621,750, a decrease of 10,500 from the previous week's revised average of 632,250.   Continuing Claims read 6.816 million following a revised print of 6.757million last week (revised from 6.735 million).

The market was expecting initial jobless claims to read closer to 615,000, so...after the better than expected data, stock futures moved higher. Adding to momentum in equities was the 830am release of Retail Sales data. The market was expecting Retail Sales to increase 0.2% (ex autos), the release indicated a month over month 0.5% increase in retail sales. This follows a 0.2% fall in April.

Stock futures did move higher after the data releases, in the bond market the 2 yr TSY note yield slid lower almost 5bps and the benchmark 10 yr note yield fell from 4.004% to 3.95%. Seem odd to you that stocks would move higher and note yields lower? This goes to show you how professional traders are treating this market....after the beating many positions took last is apparent benchmark fixed income investors have been looking to recover some of their losses. I cannot stress this enough...professional traders are professionally trading this market, often times logical expectations will be contradicted by the market's technical reactions...dont let it get to you, watch the range! (See below)

Once again....MBS coupons are taking their directional guidance from the gyrations of the yield curve...BUT as sentiment begins to show signs of shifting, MBS market participants will slowly and surely look to take advantage of deeeeeply discounted "rate sheet influential" coupons and yield spreads should tighten a bit. Yesterday some accounts were already moving "down in coupon" (JW loves "down in coupon" all day long) while banks stayed close to current coupon FN 5.0s and servicers and originators dumped a reported 4.5bn. (Advanced readers: extension risk and duration worries are this point we should be seeing some increased bargain buying, especially with spreads relatively wide)

Matt put together some UST10YR technicals for you last night....if you are chart watcher I recommend watching 10 yr futures as well...

At 10am the market gets Business Inventories data. Consensus forecasts indicate a 1.0% fall. At 1pm the Treasury Department will auction $11bn long bond.  Lastly at 1:05 Atlanta Fed president Lockhart will give a speech on the US Economy.

2s/10s: 258bps

6/10 EFFECTIVE FED FUNDS:   +0.00  to  0.18  from 0.18


O/N LIBOR:      -0.0025   to  0.2612   from  0.2637

1 MONTH:       -0.0013    to  0.3194   from  0.3206

3 MONTH:       -0.0094    to  0.6294   from  0.6388

6 MONTH:       -0.0113    to  1.2175   from  1.2287

1 YEAR:            -0.0025    to  1.7900   from  1.7925