Job Report

http://globalhomefinance.com

What happened yesterday? The benchmark FNMA 3.5% August coupon gained +13 basis points from Wednesday's close which gave a very small improvement to pricing. Initial Jobless Claims dropped lower and slightly beat the consensus estimates (333K vs 336K). This is a nice level and is generally negative for MBS. But offsetting that headline data snippet is the fact that the prior week was revised upward and the Continuing Claims were worse than expected. As a result MBS rallied (better pricing for you). We reached our best levels of the day +30BPS at 11:45EDT. Many of you received a reprice for the better after that point. But MBS started to retreat from their highs after the 30 year Treasury bond auction results were released at 1:05EDT. The bid-to-cover ratio (a key measure of demand) fell from the recent average of 2.55 down to 2.11 for this auction. This was negative for MBS and the benchmark FNMA 3.5% August coupon pulled back -21BPS from our highs as a result (worse pricing for you). MBS still closed in positive territory for the day but clearly our rally has "topped out". Remember that today is the monthly bond coupon rollover from August to September.