MBS OPEN: Rates Range Holds After Jobless Claims Data

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Jobless Claims have been released...the number of people filing initial claims for state unemployment benefits was essentially unchanged, rising by just 1,000 to a seasonally adjusted 434,000. This small rise follows large declines in the previous two weeks. The Reuters survey of economists called for 447,000 new claims...so although claims moved higher, the data was better than expected.

Unadjusted Claims were pretty poor...

UNADJUSTED INITIAL JOBLESS CLAIMS ROSE TO 645,571 JAN 2 WEEK FROM 557,571 PRIOR WEEK  
UNADJUSTED CONTINUED CLAIMS ROSE TO 5,479,110 DEC 26 WEEK FROM 5,090,381 PRIOR WEEK 

Here is a table summarizing the data:

The bond market's initial reaction was higher rates/lower prices....

Following a morning selloff yesterday, 10s moved sideways in a tight range for the remainder of the US session. This sideways range extended into overnight trading. After the release of jobless claims data the 10yr note  briefly broke out of the sideways range. At the moment the 3.375 coupon bearing semi-annual paying 10yr TSY note is unchanged, +0-00 at 96-09 yielding 3.831%. Status quo restored, range holds. The 3.76 to 3.84 range should continue to narrow ahead of tomorrow's NFP data. Dont expect too much progress in either direction.

 In the mortgage market, the FN 4.5 was trading lower in price ahead of the 830 jobless claims print. Since then "rate sheet influential" MBS prices have started to make a comeback. Our first target: 100-14. You are not likely to see improved rate sheet rebate unless 100-14 is broken and 3.75% is tested in 10s.

Yesterday's FOMC minutes confirmed our bearish slant towards the economy. Of course this is a function of weakness in the housing market, an overhang of unemployed Americans (who need to go back to school), and tight credit conditions. Unfortunately the stock market does not appear to be reflecting this outlook at the moment. Makes you think we might see some sort of correction doesnt it?

Tomorrow's NFP might not support that bias though...another case of the marketplace benefitting from short term perceptions of stabilization instead of focusing on long term prospects for STAGNATION!

 NEXT EVENT:  11AM TSY supply terms for 3s/10s/30s