It's Thursday and we are into day two of the three day jobs data period. We have mixed data - you don't expect anything else, do you? Here's the scoop as far as the data is concerned: Initial Jobless Claims came in at 269K, 1K higher than the 268K expected. Continuing Jobless Claims came in at 2,161K, 26K lower than expected - this is negative for pricing (i.e. bad for rates). The ISM Non-manufacturing index came in at 55.9, 2.4 points lower than the expected 58.3 but still a strong showing as it is well above the 50 level which shows growth. This is a more important index than the manufacturing side since the service sector / consumers make up 2/3 or our economy. Factory orders were a bit hotter than expected at 1.5 vs. estimates of 1.4.
How is the bond market reacting to the data? I'll say it again, on Tuesday I recommended that you / your clients lock ahead of the jobs data. The FNMA benchmark bond just had a nice little run-up. Taking advantage of those gains were ideal. Yesterday the benchmark bond was down 28 basis points, erasing all but 2 basis points of Tuesday's gains. Today it's down 32 basis points taking us back to November 23 pricing and erasing all of the gains from the run-up. I reiterate the lock recommendation as more good data tomorrow will help continue the sell off. If you lock now and rates improve dramatically (not likely considering how close we are to the 16th and what many consider a lock for the first Fed Funds Rate increase), you could float down - assuming your lender offers this option. The RSI is now a bit closer to oversold than overbought so there is that. Our first support level is just 11 basis points below the current level of 103.33. All of the moving averages are above the current pricing level so the first support level is not real strong and a sell-off could snowball into something big. The downside risk is much bigger than the potential upside reward.
Contact me if I can help in anyway - 801-853-8720 or 702-812-1214. Make it a great day.