MBS MID-DAY: On The Ropes Despite Lack Of Fundamental Motivation

MBS Pricing Snapshot

Treasuries were relatively flat and traded with exceedingly low volume during the Asian hours of the overnight session. But shortly into the European session, the German Constitutional court said that that it's ruling on the ESM would go ahead as planned tomorrow, despite news that a delay was considered yesterday. This provided the biggest pop higher in yields overnight and brought in volume at a healthy clip.

German Bunds were able to recover quickly after processing that headline but weren't able to make it back to yesterday morning's lows. Treasuries mimicked the movement and everything ratcheted to slightly weaker territory in the hour leading up tot he domestic open.

MBS opened several ticks lower and continue to move lower after the first hour, with Fannie 3.0s now down 7 ticks at 103-18. 10yr yields are up more than 3bps from 5pm levels, but essentially unchanged from the official 3pm close at 1.685. Stock futures moved higher after the German court news and have traded in a narrow, sideways range since then.

There's not other significant data scheduled for this morning and even the 1pm 3yr Treasury Auction isn't likely to be a major market mover. For now, we're trading technically, defensive of the 1.69 supportive ceiling in 10's and wary about the possibility of breaking higher.

- July Trade Deficit $42 bln vs $44 bln consensus
- Exports -1.0 pct, imports down -0.8 pct
- Trade gap with China to record high $29.38 bln
- July Oil import prices lowest since March 2011

The U.S. Census Bureau and the U.S. Bureau of Economic Analysis, through the Department of Commerce, announced today that total July exports of $183.3 billion and imports of $225.3 billion resulted in a goods and services deficit of $42.0 billion, up from $41.9 billion in June, revised. July exports were $1.9 billion less than June exports of $185.2 billion. July imports were $1.8 billion less than June imports of $227.1 billion.

In July, the goods deficit decreased $0.2 billion from June to $57.3 billion, and the services surplus decreased $0.3 billion from June to $15.3 billion. Exports of goods decreased $1.9 billion to $130.8 billion, and imports of goods decreased $2.1 billion to $188.1 billion. Exports of services were virtually unchanged at $52.5 billion, and imports of services increased $0.3 billion to $37.2 billion.

The goods and services deficit decreased $3.6 billion from July 2011 to July 2012. Exports were up $4.9 billion, or 2.8 percent, and imports were up $1.4 billion, or 0.6 percent.