It's Hump Day!! We are half way through the week but we are at the beginning of three days of jobs reports. Some interesting stuff is happening in the markets today but let's start with a recap of yesterday. There was another huge sell-off in the stock market which was the main driver for the bond markets. The FNMA benchmark mortgage bond closed up 25 basis points to erase Monday's losses. I recommended locking by the end of business yesterday ahead of the jobs reports that are released today through Friday because of the potential for sell-off in the bond markets which push rates higher. This morning, stock are recovering a bit with the DJIA currently up 186 points. This is the main driver for why bonds have sold off a bit this morning with the benchmark bond currently down 12 basis points.
From a technical standpoint the 103.83 resistance level is proving to be strong as the chart shows the benchmark bond as been unable to break through that level with any strength over the last 4 days. The longer that streak goes, the stronger that resistance gets and the more likely it is that there will be a sell-off from this point. On the other hand, bonds are a bit closer to oversold than overbought, according to the RSI (Relative Strength Indicator). Additionally, there is support at 103.66, though it hasn't been tested as much as the resistance level.
Fundamentally, the data this morning is good for bonds even if half of it is a bit on the old side. The ADP Private Payrolls report came in at 190K vs. estimates of 201K and July was revised down from 185K to 177K. This is slightly positive for pricing and is probably helping to offset the negativity of a rebounding stock market. The final reading of Non-farm Productivity came in at 3.3% (being more productive means being able to keep costs, and inflation, down) vs. estimates of 2.8%. The more closely watched Unit Labor Costs came in at -1.4% vs. estimates of -.9%. Finally, July Factory Orders came in substantially lower than expected at .4% vs. expectations of .9%. While this is all good news for interest rates, its also old news and so it won't have much of an impact.
What's on tap for tomorrow? If you or your client are floating, I would recommend locking before the close of business today. Tomorrow's data includes Jobless Claims and ISM Non-manufacturing index. Friday is the big day with Non-farm Payrolls and the Unemployment Rate (maybe one day they'll start publicizing the Workforce Participation Rate since that tells a much better story of unemployment, but I digress). Digressing even further, tomorrow is also a big day because it's the start of college football season with the University of Utah Utes (my alma mater) taking on the Michigan Wolverines (one of my favorite teams as a kid) at 6:30 MDT / 5:30 PDT on Fox Sports 1 - YES, I will be glued to the tv after having some yummy pre-game football food.
Don't ever hesitate to call me if I can help with anything mortgage-related (801-853-8720 or 702-812-1214). As always, make it a great day.