Mortgage Bond Market Analysis - Jobless Claims Edition

It's Thursday which means the Weekly Jobless Claims report is out.  Expectations were for 290K and actual claims came in better than expected at 278K which is worse than last week's reading of 267K.  Overall, this is negative for pricing.  Adding to that negativity is a sharp increase in Unit Labor Costs which came in at 2.7 vs. expectations of 1.2 and previous of -2.3.  Additionally, non-farm productivity was down 1.8 while expectations were for +.5 vs. previous of +3.7; this is a big reason why the labor costs rose.

There is definitely some volatility this morning, though the swings aren't huge.  Here an early morning snapshot of the mortgage bond chart:

As you can see, the FNMA benchmark bond was down 26 basis points at this time.  The RSI (Relative Strength Indicator) is also down, hovering just above 50.  This means that investors aren't likely to sell based on the technicals - the data will drive the buying and selling (it always does but if the market is overbought or oversold, that can drive it too.).

Economic data for tomorrow:  Tomorrow is the first Friday of the month which can only mean one thing:  non-farm payrolls and the unemployment rate.  These numbers are always watched closely and can have a big influence on the direction of both the stock and bond markets.  The expectation is for non-farm payrolls to come in at 235K which is less than last month's reading of 252K.  The unemployment rate is expected to remain steady at 5.6%.  It's always your call, but if I had to lock, I'd play it safe and lock ahead of tomorrow's report.  Check to see if your lender has a float down option - we do.  Make it a great day and contact me if I can help you with a mortgage - 702-812-1214.