MBS MID-DAY: Jobless Claims Fail To Challenge Narrow Range

By: Matthew Graham
MBS Live: MBS Morning Market Summary
Yesterday's highest 10yr yield was 1.727 seen just after 6am New York time.  Today's high yield?  1.727, seen both at 8:37am following Jobless Claims and again just now in the 11am hour.  It COULD break, but hasn't yet.  MBS are even more contained, trading well inside yesterday's range and only 1 tick lower at the moment.  All this despite stronger-than-expected data, one more Treasury Auction to take down this afternoon, and a stock market rally.  The conclusion is that there's just as much will to keep a lid on rates as there is to reinforce a recent floor (connoted by 1.68 in 10yr yields, give or take, and a ceiling around 104-11 in Fannie 3.0 MBS).  With each passing day this week, we continue to be impressed--surprised even--by how narrowly contained the range has been.  It truly seems to be doing its best to make it to next week's more informative events.
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
104-07 : -0-01
FNMA 3.5
106-10 : -0-01
FNMA 4.0
106-29 : -0-01
FNMA 4.5
107-22 : -0-01
GNMA 3.0
105-29 : -0-04
GNMA 3.5
108-22 : -0-02
GNMA 4.0
109-15 : +0-00
GNMA 4.5
108-32 : -0-04
FHLMC 3.0
103-25 : -0-01
FHLMC 3.5
106-01 : -0-02
FHLMC 4.0
106-19 : -0-01
FHLMC 4.5
106-29 : +0-00
Pricing as of 11:03 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.

9:22AM  :  Moderate Bounce Following Claims-Induced Weakness
MBS and Treasuries moved into weaker territory immediately following the release of this morning's lower-than-expected Jobless Claims figures, but have since bounced back moderately. Fannie 3.0's are currently down 1 tick on the day at 104-07, off 2 ticks from the pre-claims highs. 10yr yields are up 1.5bps on the day at 1.718 after trading just under 1.71 before the data and hitting 1.725 at their worst.

Jobless Claims has proven to be the only significant source of inspiration this morning as overnight markets were generally calm. This was the expectation owing to a lack of data and events where the only standouts include UK GDP turning positive, Spanish Unemployment hitting a record 27.2%, and Italy being expected to form a government in the next few days.

All of that SOUNDS like big news, but markets haven't treated it as such. Reasons being: UK GDP and Spanish unemployment were both fairly close to the consensus. As far as Italy is concerned, markets have been gradually pricing in a similar scenario for weeks (ESPECIALLY this week when Napolitano was reelected, a new Prime Minister was named, and Italian credit spreads returned to pre-February Election levels, all before today's session). Bottom line: none of "that stuff" was a big surprise for markets.

With the only significant domestic data out of the way, MBS and Treasuries are left at the whim of tradeflows, technicals, and potential stock lever connection. To that end, cash equities open in about 10 minutes. In the afternoon, the last of the week's Treasury Auctions arrives in the form of 7yr Notes at 1pm. In and of themselves, they're not usually a big mover, but there can be some collective "relief" with the completion of the overall auction cycle. We're not expecting much in that regard, but it could be slightly beneficial if the auction results are close to average.
8:36AM  :  ECON: Jobless Claims Lower Than Expected
- Claims 339k vs 351k consensus
- 4-week average fell to 357.5k vs 361,250 previously
- Continued claims fell to 3.0 mil, lowest since May 08
- Market Reaction: Bond market weakness, but relatively contained so far. 10yr yields up less than 1.5 bps and Fannie 3.0s MBS off 4 ticks.

In the week ending April 20, the advance figure for seasonally adjusted initial claims was 339,000, a decrease of 16,000 from the previous week's revised figure of 355,000. The 4-week moving average was 357,500, a decrease of 4,500 from the previous week's revised average of 362,000.

The advance seasonally adjusted insured unemployment rate was 2.3 percent for the week ending April 13, a decrease of 0.1 percentage point from the prior week's unrevised rate. The advance number for seasonally adjusted insured unemployment during the week ending April 13 was 3,000,000, a decrease of 93,000 from the preceding week's revised level of 3,093,000. The 4-week moving average was 3,071,750, a decrease of 17,500 from the preceding week's revised average of 3,089,250.
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.

Mike Ford  :  "booking my 1st 2.5% 15yr..just wild"
Matthew Graham  :  "Freddie"
Andy Pada  :  "is the Freddie 80% figure about their issuances or total (Fannie and Freddie) issuances/"
Matthew Graham  :  "RTRS- FREDDIE-SINGLE-FAMILY REFINANCE-LOAN PURCHASE AND GUARANTEE VOLUME WAS $41.8 BLN IN MARCH, OR 80% OF TOTAL MORTGAGE PORTFOLIO PURCHASES OR ISSUANCES "
Jeff Anderson  :  "GM, all. I expected it to be a little better. Weren't people glued to Boston last week? "
Matthew Graham  :  "RTRS- US JOBLESS CLAIMS 4-WK AVG FELL TO 357,500 APRIL 20 WEEK FROM 362,000 PRIOR WEEK (PREVIOUS 361,250) "
Victor Burek  :  "finally a beat"
Matthew Graham  :  "RTRS- US JOBLESS CLAIMS FELL TO 339,000 APRIL 20 WEEK (CONSENSUS 351,000) FROM 355,000 PRIOR WEEK (PREVIOUS 352,000) "
John Tassios  :  "Also, this confirms that inflation is pretty low , even in Eurozone, for them to do this move now. Low inflation will help keep bond yields low for this year "
Matthew Graham  :  "Past few ECB announcements, there hasn't been much movement on the release... This time, there could be."
Matthew Graham  :  "The uncertainty most likely means that markets have more options for "reaction" tomorrow morning at 7:45am ET"
Matthew Graham  :  "I think the potential onset of economic negativity in Germany is the driving force behind that, as we discussed yesterday I think (when you rightly said Germany is the ECB). So it's definitely possible. I read the headline though and .5 feels aggressive for some reason--maybe because it's more than the minimum increment, but I think they either don't cut or go .25"
Justin Bayle  :  "And what does that uncertainty mean for bonds IYHO?"
Victor Burek  :  "gm mg...you think they cut?"
Matthew Graham  :  "That's interesting because it suggests there is no clear consensus on what's going to happen next Thursday--which hasn't been the case in a while."
Matthew Graham  :  "RTRS - REUTERS POLL-ECB TO CUT INTEREST RATES TO 0.5 PERCENT NEXT WEEK, SAY 43 OF 76 ECONOMISTS "

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