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On Friday, MBS prices fell roughly two points following a stronger than expected Employment report. This morning, MBS have steadily moved higher to recover a portion of Friday's enormous losses. The Dow is up 100 points. No economic data will be released today. Stronger than expected Employment data crushed MBS prices Friday. Against a consensus forecast of 160K, the economy added 195K jobs in June, and upward revisions to the figures from prior months added another 70K. The Unemployment Rate remained at 7.6%. Average Hourly Earnings, a proxy for wage growth, increased more than expected. In short, this report exceeded expectations in nearly every area. The European Central Bank (ECB) made no change in rates, but the ECB President said that he expects rates will "remain at present or lower levels for an extended period of time." Uncertainty in Egypt continued to push oil prices higher. MBS are down -194bp (FNMA 30-yr 3.5 at 98.97), around 56bp below morning levels, and at the low for the day. Unfavorable repricing took place. Quite simply, a stronger than expected Employment report caused large losses for MBS markets. Beyond that, investors watched the continued violence in Egypt, but it had little impact outside of oil markets. The Dow is up 150 points. For the week, MBS fell about 250bp.
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