MBS MID-DAY: 12/16/2011


Consumer Prices in November were effectively unchanged, falling 0.019% versus a consensus of +0.1%. But excluding food and energy, the so-called Core CPI rose slightly faster than the expected 0.1% at a pace of 0.1731%. This brings the year-over-year headline CPI to +3.4% vs a +3.5% consensus and the Core to +2.2% vs a +2.1% consensus.

Energy prices fell, let by a 4.4% decline in natural gas, the biggest in a year. Gas prices fell 2.4% as well. Food, Housing, and Rent all increased 0.1%.

This report came in close enough to the consensus and has fallen far enough from its previous perch as one of the most anticipated economic indicators of the month, that we’re seeing limited, but slightly positive reaction in bond markets. 10yr yields are down to 1.911 in the 10 minutes following the report. Fannie 3.5’s shared in the positivity at first but just ticked down from 102-15 to 102-13. Trading in MBS is choppy and illiquid.

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