Mortgage backed securities (MBS) prices are lower (rates higher) as the Fed prepares to purchase debt today, part of an effort to lower consumer borrowing costs and amid a two-week hiatus in the government's auction schedule; FNMA 4.0% coupon 100.16bps, -4bps. Intial jobless claims jumped 32K to a much higher than expected 637K as a reacceleration in job losses is fed by auto shutdowns. The 4 week moving average, a less volatile measure, rose to 630K from 624K and the total number of people collecting benefits surged 202K to a record 6.56 million, indicating companies are still not hiring. Prices paid to factories, farmers and other producers rose 0.3% in April, more than forecast, as food costs increased 1.5%, the biggest gain in more than a year. Egg prices spiked 44% due to seasonal adjustments around Easter. The "core" rate, excluding fuel & food, climbed 0.1% as anticipated. On an annual basis, producer prices were down 3.7%, the biggest drop since 1950. Treasury yields have climbed recently, 65bps since March 18, more as a reflection of a better economic outlook than a signal to step up purchases of government debt by the Fed. The goal is not to target rates but to stimulate private lending & efforts to revive lending are working; 3mo LIBOR declined to a record low 0.85%.