MBS MID-DAY: Loan Pricing Worse

(Reuters) - A measure of future U.S. economic growth fell to a 29-week low in the latest week, while an annualized growth gauge dropped to a 27-week low, a research group said on Friday. The Economic Cycle Research Institute, a New York-based independent forecasting group, said its Weekly Leading Index fell to 126.4 in the week ended June 24 from 127 the previous week. That is its lowest point since December 3, 2010. The index's annualized growth rate also dropped, to 2 percent from 2.9 percent a week earlier, reaching its lowest point since December 17, 2010. "With WLI growth experiencing a pronounced and pervasive decline for 10 straight weeks from its mid-April peak to a 27-week low, the economy is set for a sustained slowdown in growth," said ECRI's Co-founder Lakshman Achuthan.

(BUSINESS WIRE)--Economic activity in the manufacturing sector expanded in June for the 23rd consecutive month, and the overall economy grew for the 25th consecutive month, say the nation’s supply executives in the latest Manufacturing ISM Report On Business. The report was issued today by Bradley J. Holcomb, CPSM, CPSD, chair of the Institute for Supply Management™ Manufacturing Business Survey Committee. “The PMI registered 55.3 percent, an increase of 1.8 percentage points from May, indicating expansion in the manufacturing sector for the 23rd consecutive month. New orders and production were both modestly up from last month, and employment showed continued strength with an increase of 1.7 percentage points to 59.9 percent. The rate of increase in prices slowed for the second consecutive month, dropping 8.5 percentage points in June to 68 percent. This follows a similar reduction of 9 percentage points in the Prices Index in May, and is the lowest figure since August 2010 when the index registered 61.5 percent. While the rate of price increases has slowed and the list of commodities up in price has shortened, commodity and input prices continue to be a concern across several industries.” PERFORMANCE BY INDUSTRY Of the 18 manufacturing industries, 12 are reporting growth in June, in the following order: Miscellaneous Manufacturing; Printing & Related Support Activities; Computer & Electronic Products; Paper Products; Textile Mills; Petroleum & Coal Products; Nonmetallic Mineral Products; Transportation Equipment; Chemical Products; Fabricated Metal Products; Machinery; and Electrical Equipment, Appliances & Components. The five industries reporting contraction in June are: Plastics & Rubber Products; Apparel, Leather & Allied Products; Primary Metals; Wood Products; and Food, Beverage & Tobacco Products.

(Reuters) - U.S. construction spending fell for a sixth straight month during May to its lowest in more than a decade, according to a Commerce Department report on Friday that underlined the soft pace of activity in building trades that normally are major employers. Spending on new construction fell 0.6 percent after a matching revised 0.6 percent April drop that previously was reported as a 0.4 percent increase. Economists surveyed by Reuters had forecast May construction spending would be flat. Total May spending was at a seasonally adjusted annual rate of $753.48 billion, the lowest rate since $751.4 billion in September 1999, the department said. Spending on both public and private building projects weakened in May. Overall private construction fell 0.4 percent and, within that category, spending on new homes and apartment buildings fell 2.1 percent. Public construction spending for projects like improved highways and streets, new schools and transportation projects declined 0.8 percent in May after a 2.4 percent April fall. (Reporting by Glenn Somerville, Editing by Chizu Nomiyama)

It's not yet clear where trading will level off following a stronger than expected ISM Report, but negative reprices or weaker initial rate sheets are at risk as MBS fell 5/32nds following the data. 10yr notes moved immediately to 3.21 support but are currently at 3.188.

(Reuters) - U.S. consumer sentiment worsened in June on jitters about the economic outlook and spending is likely to remain lackluster in the long-term, a survey released on Friday showed. Falling gasoline prices stabilized consumers' view of their current economic conditions, but expectations remained gloomy, the Thomson Reuters/University of Michigan survey showed. The final reading for the consumer sentiment index came in at 71.5, down from 74.3 the month before. It was a hair below the preliminary June figure of 71.8 and shy of the median forecast for 71.9 among economists polled by Reuters. While small spending gains can be expected in the second half of the year, the trend is more likely to vary between lackluster and zero than lackluster and robust over the next several years, the survey said. "Resurgent spending is not on the horizon, nor is widespread retrenchment," survey director Richard Curtin said in a statement. "Importantly, the consumer no longer has the financial wherewithal to power the economy into overdrive." The survey's barometer of current economic conditions edged up to 82.0 from 81.9 in May. The gauge of consumer expectations fell to 64.8 from 69.5 and below forecasts for 66.6. Consumers one-year inflation outlook improved, falling to 3.8 percent from 4.1 percent. But the five-to-10-year inflation outlook inched up to 3.0 percent from 2.9 percent. (Reporting by Leah Schnurr, Editing by Chizu Nomiyama)

Fannie Mae 4.0 Coupons are 5/32nds better vs yesterday's closing levels, suggesting slightly improved rate sheet offerings this morning. Treasuries are improved overnight as well. (Reuters) - The prices of U.S. Treasuries rose ahead of the release of key U.S. manufacturing data, but trading volume was light, analysts said. Lower commodity prices also helped drive the moderate bid for Treasuries, but traders were mostly waiting for the Institute for Supply Management's June manufacturing reading, which would either confirm a slowdown in manufacturing activity or offer a strong new source of hope for continuing economic recovery. A slowdown in manufacturing would be good for bonds, but regional U.S. manufacturing measures have shown a mix of weakness and surprising strength, making the ISM nation-wide numbers hard to predict. Globally, however, manufacturing activity has slowed.