MBS RECAP: 10/12/2011

It's been an interesting if painful week in the sense that we've had plenty of market movement and have yet to receive any of the usual morning economic reports. That'll change tomorrow as the standard-issue Jobless Claims hit at 830am along with International Trade at the same time.

Then at 1pm, the last of the week's Treasury Auctions arrives with the 30yr Bond. The monthly report on the Treasury Budget hits at 2pm and there's some Fed-Speak from Kocherlakota at 230pm. For more details on the week's economic data and events, see MND's Week Ahead:

(Reuters) - Fannie Mae will have access to enough public funds to continue operations even after its unlimited taxpayer lifeline expires at the end of 2012, its chief executive said in an interview.

Fannie Mae CEO Michael Williams told Reuters the firm has "plenty of room" to operate with the funds it was first provided when it was taken over by the government in September 2008. The unlimited access to funds from the U.S. Treasury Department ends next year.

Williams also said Fannie Mae wanted to do whatever it could to ensure a government program to help distressed borrowers refinance was as effective as possible.

He suggested policymakers "define a timeline for the program" -- the Home Affordable Refinance Program -- as regulators and the White House look for ways to rework it to make it accessible to more borrowers. (Reporting by Margaret Chadbourn; Editing by Andrea Ricci)

RTRS- MOST OFFICIALS SAW CONDITIONS CONDUCIVE TO ADDITIONAL ACCOMMODATION - MINUTES

Granted, there are divisions within the Fed over whether or not the current level of accommodation is appropriate or not. So here we have FOMC minutes saying "most officials" think conditions suggest additional accommodation. Let's put that together with a few other things we know....

In the same meeting minutes, the FOMC said they considered

1. balance sheet expansion
2. communicating explicit job market objetive
3. lowering rate on excess reserves

and systematically shot all of those down with additional comments seen in the minutes. Combine that with the fact that we already know that Operation Twist has been considered and executed, and "non-QE" options look fewer and farther between.

Combine all of the above with the fact that stocks have rallied since the Minutes were released and bonds/MBS have sold and could we consider stock market buoyancy as some sort of latent hope for some iteration of a QE3? Just sayin...

Anyway, don't miss the above reference to MBS being back down again... Now back to 100-28 after hitting 101-00 right around FOMC time. Stocks are at new highs. Things might get shaky, but MBS look like they're holding their ground for now.

A few lenders repriced for the worse, and while it's possible there could still be a few laggards who may reprice soon, it's getting less and less likely as MBS have put in a few convincing bounces around this morning's lows near 100-23+. They got as low as 100-19 at one point but have inched back toward and inflection point at 100-29, and in a pretty stable fashion to boot. Reprices for the better might not even be out of the question if this stability continues into/through FOMC minutes at 2pm.

Caveat: Still too soon to know how post auction trading will shake out, but the 10yr auction was not good. Bid-to-cover was significantly worse than average (2.86) and the high yield of 2.271 was significantly higher than the 2.236 when-issued yield.

Fannie 3.5 30's had been trading a narrowing range around 101-00 earlier and are now down to 100-25, although part of that slide occurred leading up to the auction. Although 10 yr yields look to have stopped the bleeding for now, it could proved to be a brief bounce around 2.26 (currently 2.2583).

Reprices for the worse are possible at this point, but not a widespread likelihood unless MBS fall further from here or are otherwise unable to bounce back.

(Reuters) - The number of jobs waiting to be filled fell in August, underscoring the pain in the labor market where millions of unemployed workers have been shut out of the economic recovery.

There were only 3.06 million available jobs at the end of August, down from July's downwardly revised 3.21 million, according to the Labor Department's Job Openings and Labor Turnover Survey released on Wednesday.

Monthly job openings -- unfilled, posted vacancies that employers plan to fill within 30 days -- help describe demand for labor. The number has consistently hovered well below the 4.4 million openings registered in December 2007, before the 2007-2009 recession.

Some 8 million Americans lost their jobs in the recession and only 1.4 million of those jobs have come back during the recovery.

Hiring rose marginally in August, with businesses and government hires climbing to 4.01 million from 3.98 million a month earlier, too small a gain to bring down the U.S. unemployment rate.

The rate at which workers were separated from jobs by layoffs or quits, a measure of labor turnover, was 3.1 percent in August.