MBS MID-DAY: Another Quiet Morning After Shrugging Off Jobless Claims Weirdness

By: Matthew Graham
MBS Live: MBS Morning Market Summary
In case you missed it and/or don't have time to check out the update below, today's drop in Jobless Claims was big enough to raise some eyebrows, but not before Treasuries sold off a bit and waited for the domestic stock markets to cast their vote.  A spokesperson for the Labor Department noted that the big drop was due to a "large state" missing this week's jump through one of the DOL's bureaucratic hoops in order to have it's claims reported.  That state remains anonymous until next week, but the spokesperson noted that this one state accounted for most of the drop and its claims would eventually be reported.  "Stuff like this" happens from time to time, and is one of the reasons markets track the 4-week moving average for Claims.  Despite the hiccup, MBS still managed to hold their ground at yesterday's pre-auction highs and seem ready to fly a holding pattern into today's 30yr Auction at 1pm.
MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
FNMA 3.0
105-02 : -0-04
FNMA 3.5
106-16 : -0-03
FNMA 4.0
107-06 : -0-02
FNMA 4.5
107-32 : -0-02
GNMA 3.0
106-23 : -0-02
GNMA 3.5
108-26 : -0-02
GNMA 4.0
109-09 : -0-03
GNMA 4.5
109-10 : +0-01
FHLMC 3.0
104-30 : -0-06
FHLMC 3.5
106-11 : -0-04
FHLMC 4.0
106-27 : -0-03
FHLMC 4.5
107-07 : -0-04
Pricing as of 11:07 AM EST
Morning Reprice Alerts and Updates
Below is a recap of instant Reprice Alerts and updates issued via email and text alert to MBS Live subscribers this morning.

10:27AM  :  Fed's Stein Says Firmly Behind Latest Stimulus
(Reuters) - U.S. unemployment remains "painfully high" while inflation is not an immediate concern, giving the Federal Reserve plenty of reason to launch a new stimulus last month, a top Fed official said.

Jeremy Stein, in his first keynote speech since becoming a Fed governor in May, said he strongly supported the central bank's decision to embark on a new, open-ended bond buying program.

His comments suggest that despite cries of foul from a handful of hawkish regional Fed bank presidents, Fed Chairman Ben Bernanke had solid backing for the third round of quantitative easing, or QE3, announced in September.

Stein said the plan was needed to boost an economy that was growing too slowly to bring down the nation's unemployment rate, currently at 7.8 percent.

"It appears that the economy is growing at a pace such that, absent policy action, progress on reducing unemployment will likely be slow for some time," Stein told an event at the Brookings Institution. "Given where we are, and what we know, I firmly believe that this decision was the right one."
9:29AM  :  ALERT ISSUED: Bond Markets In Weaker Territory Overnight, AM Data Not Helping
The overnight was no friend to bond markets, but to look for any causality in the events would be folly considering that trading was extremely orderly and moved in narrow ranges. Things were slightly stronger into Asian hours and slightly weaker in European hours. We'd heard that the S&P downgrade of Spain was a positive factor for US Treasuries, but we're not really seeing a reaction to that, or anything else for that matter.

Clearly (like REALLY clearly), the only "cause and effect" reaction this morning is to the 8:30am data. The leading contender among the 3 reports that printed is the weekly Jobless Claims report that showed the lowest claims in over 4 years. We don't need to express an opinion on the "conspiracy theory" aspects of this (such as, it was fabricated for tonight's Vice Pres debate) in order to see that the first legitimate break below 350k in over 4 years (though July 2012 was close at 352k) is cause for bond markets to be concerned at a potentially improving labor market. But our initial reaction remains: it will be interesting to see next week's numbers, including the revision of today's print.

Whatever the case in the future, things are a bit bumpy here and now with 10yr yields up almost 4bps since the report at 1.73. MBS, for their part, are holding their own fairly well. Fannie 3.0s opened just under yesterday's afternoon highs and are currently trying to hold on to 105-00, which is 6 ticks lower than yesterday's close.
8:44AM  :  ECON: Import And Export Prices Both Rise Faster Than Expected
- Imports +1.1 vs +0.7 est.
- Exports +0.8 vs +0.4 est.

U.S. import prices advanced 1.1 percent for the second consecutive month in September, the U.S. Bureau of Labor Statistics reported today, after falling the previous four months. The increase in each of the past two months was led by rising fuel prices. The price index for U.S. exports rose 0.8 percent in September following a 1.0 percent advance in August.
8:42AM  :  ECON: Trade Gap Widens As Expected In August
The U.S. Census Bureau and the U.S. Bureau of Economic Analysis, through the Department of Commerce, announced today that total August exports of $181.3 billion and imports of $225.5 billion resulted in a goods and services deficit of $44.2 billion, up from $42.5 billion in July, revised. August exports were $1.9 billion less than July exports of $183.2 billion. August imports were $0.2 billion less than July imports of $225.7 billion.

In August, the goods deficit increased $1.5 billion from July to $59.3 billion, and the services surplus decreased $0.3 billion from July to $15.1 billion. Exports of goods decreased $2.1 billion to $128.5 billion, and imports of goods decreased $0.7 billion to $187.8 billion. Exports of services increased $0.2 billion to $52.8 billion, and imports of services increased $0.5 billion to $37.7 billion.

The goods and services deficit decreased $0.6 billion from August 2011 to August 2012. Exports were up $2.9 billion, or 1.6 percent, and imports were up $2.3 billion, or 1.0 percent.
8:39AM  :  ECON: Jobless Claims Lowest Since February 2008
In the week ending September 29, the advance figure for seasonally adjusted initial claims was 367,000, an increase of 4,000 from the previous week's revised figure of 363,000. The 4-week moving average was 375,000, unchanged from the previous week's revised average.

The advance seasonally adjusted insured unemployment rate was 2.6 percent for the week ending September 22, unchanged from the prior week's unrevised rate. The advance number for seasonally adjusted insured unemployment during the week ending September 22 was 3,281,000, unchanged from the preceding week's revised level. The 4-week moving average was 3,285,250, a decrease of 12,750 from the preceding week's revised average of 3,298,000.
Live Chat Featured Comments
A recap of the featured comments from the MBS Live Dashboard's Live Chat feature, utilized by hundreds of industry professionals each day.

Matthew Graham  :  "one side of the conspiracy spectrum: http://www.zerohedge.com/news/2012-10-11/data-massaging-continues-initial-claims-tumble-339k-lowest-2008-far-below-lowest-exp"
Jerry Turner  :  ""The advance number of actual initial claims under state programs, unadjusted, totaled 327,063 in the week ending October 6, an increase of 25,990 from the previous week" interesting"
Victor Burek  :  "yes they are, here is a link to the actual release, http://www.dol.gov/opa/media/press/eta/ui/current.htm"
Jerry Turner  :  "are the jobless claims seasonally adjusted? Party City by me hired almost 30 part-time workers (incl my daughter) but it's only until Halloween."
Matthew Graham  :  "RTRS- U.S. SEPT NON-PETROLEUM IMPORT PRICES +0.2 PCT, YEAR-OVER-YEAR -0.9 PCT "
Matthew Graham  :  "RTRS- U.S. SEPT EXPORT PRICES +0.8 PCT (CONSENSUS +0.4 PCT) VS AUG +1.0 PCT (PREV +0.9 PCT) "
Matthew Graham  :  "RTRS- U.S. SEPT IMPORT PRICES +1.1 PCT (CONS. +0.7 PCT) VS AUG +1.1 PCT (PREV +0.7 PCT) "
Matthew Graham  :  "RTRS- US AUG OIL IMPORT PRICE $94.36/BBL VS JULY $93.83/BBL, -8.1 PCT FROM AUG'11 $102.65/BBL "
Matthew Graham  :  "RTRS- US AUG EXPORTS -1.0 PCT VS JULY -1.1 PCT, IMPORTS -0.1 PCT VS JULY -0.6 PCT "
Jeff Anderson  :  "I hated Statistics in college. All those numbers and stuff."
Matthew Graham  :  "if the DOL and BLS are fudging numbers, I will say this, It's the best cover-up in the history of cover-ups."
Steven Fishman  :  "98% of all statistics are made up on the spot"
Adam Quinones  :  "enough said I hope...."
Adam Quinones  :  "one comment..they're STATISTICS. "
Jeff Anderson  :  "Even Liesman is saying he thinks it's an outlier number. GM, All. Let's call the head of the Labor Dept and tell her the numbers are fudged again. She loved that last weeeks."
Matthew Graham  :  "RTRS- US AUG TRADE DEFICIT $44.22 BLN (CONSENSUS $44.0 BLN) VS JULY DEFICIT $42.47 BLN (PREV $42.00 BLN) "
Matthew Graham  :  "actually, that's a bit of a departure from the trend. Makes next few weeks pretty important"
Ira Selwin  :  "lowest since, last election year? "
Matthew Graham  :  "RTRS- US JOBLESS CLAIMS LOWEST SINCE 339,000 IN FEB 16, 2008 WEEK "
Matthew Graham  :  "RTRS- US JOBLESS CLAIMS 4-WK AVG FELL TO 364,000 OCT 6 WEEK FROM 375,500 PRIOR WEEK (PREVIOUS 375,000) "
Matthew Graham  :  "RTRS - US JOBLESS CLAIMS FELL TO 339,000 OCT 6 WEEK (CONSENSUS 370,000) FROM 369,000 PRIOR WEEK (PREVIOUS 367,000) "

Read what our user's have to say about MBS Live on LinkedIn.
» Start a two week free trial of MBS Live.