Well it's Friday and we have a bit of an anomaly happening unless you take one thing into consideration (maybe two). Today is the 3rd and last day of the jobs data and it was all strong - there was nothing mixed about it. Non-farm Payrolls came in at 211K vs. estimates of 196K. October's reading was revised upward to 298K from 271K. The Unemployment Rate stayed even at 5% as expected and the Labor Force Participation Rate went from 62.4% to 62.5%. Average Hourly Wages came in as expected with a .2% increase and the YOY figure is at 2.3%. This is all good news for the economy and negative for pricing yet the FNMA benchmark bond is up 10 basis points after being obliterated yesterday with a 56 basis point sell-off. So what gives?
On the fundamental side of things, the bond market was getting close to oversold so maybe the traders thought that could make a quick trade for some profits. More probable are some comments Janet Yellen made yesterday. The first comment is just a "good to know" comment: it takes about 100,000 jobs to absorb the new workers entering the workforce every month; anything over that helps to employ the unemployed, discouraged or those who had dropped out of the labor force. The comment that may have given bond traders the impetus to do a little buying this morning in the face of this strong data was that the United States may be "close to the point at which we should be raising." This comment doesn't feel like one that is definitive that they will start raising the Fed Funds rate; it is far more nebulous. There are many experts who have been acting / talking as if an increase to the Fed Funds rate is a foregone conclusion. Maybe it's not; apparently the bond traders have some renewed hope.
I would say that if you didn't lock on Tuesday when I first recommended it, or haven't locked since then, I would float at this point. The FNMA benchmark bond is currently up 14 basis points contrary to this strong data, and it has the initial look that it may trend up during the day. I would keep a watchful eye on the market so that you could lock quickly if needed. If the bond does trend up during the day, I'd probably float through the weekend and see what Monday brings. As always, contact me if I can help with anything mortgage related, including an intra-day update on the mortgage bond market to see if you should lock or float - 702-812-1214 or 801-853-8720. Make it a great day and a better weekend.