MBS MID-DAY: Bond Markets Hunkered Down For FOMC Announcement At 12:30pm Eastern

MBS Pricing Snapshot

30-year fixed-rate mortgage (FRM) averaged 3.55 percent with an average 0.6 point for the week ending September 13, 2012, the same as last week. Last year at this time, the 30-year FRM averaged 4.09 percent.

15-year FRM this week averaged 2.85 percent with an average 0.6 point, down from last week when it averaged 2.86 percent. A year ago at this time, the 15-year FRM averaged 3.30 percent.

5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.72 percent this week with an average 0.6 point, down from last week when it averaged 2.75 percent. A year ago, the 5-year ARM averaged 2.99 percent.

1-year Treasury-indexed ARM averaged 2.61 percent this week with an average 0.4 point, the same as last week. At this time last year, the 1-year ARM averaged 2.81 percent.

As you might expect given the afternoon's FOMC festivities (announcement at 12:30, forecasts at 2 and press conference at 2:15), the morning data wasn't the biggest market mover. Ahead of the data, 10yr yields simply meandered slightly lower overnight and held a very tight range between 1.754 and 1.737. Stock futures were similarly flat and boring. Fannie 3.0 MBS opened up about 7 ticks higher and along with treasuries, improved very slightly in the first half hour or so.

But for now, the resistance looks to be in with 3.0s topping out at 103-18 and 10's hitting 1.727, all of the above in "wake me up when something happens" volume.

Speaking of something happening, today it's all about the Fed. As we noted in The Day Ahead, the chances that we get at least SOMETHING from the Fed today are quite high. In that same vein, WSJ's Hilsenrath was out last night with his most detailed piece yet on QE3, hinting again that it's not a question of "if" but "when."

Many believe the "when" is today, and certainly it would border on disastrous for many trading positions if the Fed did nothing at the current meeting. It's a fair assumption that we didn't see more at the last meeting due to it's "standalone" nature (in that it didn't have the member forecasts or the press conference. It was also in the middle of summer).

Whatever the case, keep in mind that the Announcement itself is at 12:30pm and is the biggest potential market mover on the radar for many weeks now. The response COULD be absolutely huge, and as is the nature of such things, could move in several directions in rapid succession. We will be reporting the "knee-jerks" as they happen, without speculating on whether or not they'll reverse 30 seconds later.

- Headline PPI +1.7 vs +1.1 consensus
- Core PPI (excludes Food/Energy) +0.2 as expected
- Discrepancy is all about gas prices. No major market reaction.

The Producer Price Index for finished goods rose 1.7 percent in August, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. This increase followed advances of 0.3 percent in July and 0.1 percent in June, and marks the largest monthly rise since a 1.9-percent increase in June 2009. At the earlier stages of processing, prices received by manufacturers of intermediate goods moved up 1.1 percent in August, and the crude goods index rose 5.8 percent. On an unadjusted basis, prices for finished goods climbed 2.0 percent for the 12 months ended August 2012, the largest advance since a 2.8-percent increase for the 12 months ended March 2012.

- 382k vs 370k consensus
- Labor Dept notes TS Isaac increased claims by roughly 9k

In the week ending September 8, the advance figure for seasonally adjusted initial claims was 382,000, an increase of 15,000 from the previous week's revised figure of 367,000. The 4-week moving average was 375,000, an increase of 3,250 from the previous week's revised average of 371,750.

The advance seasonally adjusted insured unemployment rate was 2.6 percent for the week ending September 1, unchanged from the prior week's unrevised rate. The advance number for seasonally adjusted insured unemployment during the week ending September 1 was 3,283,000, a decrease of 49,000 from the preceding week's revised level of 3,332,000. The 4-week moving average was 3,316,500, a decrease of 7,500 from the preceding week's revised average of 3,324,000.