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Thursday, July 7, 2016

Mortgage Bond Market Analysis - Jobless Claims Thursday and the First Jobs Data of the Week

Happy Thursday.  We got some jobs data today and the big jobs data points finish the week tomorrow.  Yesterday we got a very hot ISM Non-manufacturing (Service sector) report that came in at 56.5, well above expectations of 53.3 - a reading over 50 is expansionary.  This morning, Jobless Claims continued its run of a the 4-week moving average being below 270K and this week's reading was 254K, much lower than the estimates of 270K.  Additionally, the ADP Private Payroll data beat expectations as well coming in at 172K vs. estimates of 159K.  Tomorrow we look forward to Non-farm Payrolls (it was extremely weak last month) and the Unemployment Rate.

In spite of the strong data yesterday and today, the market hasn't reacted in a big way as it's probably waiting to see the numbers tomorrow along with Europe still helping to provide support.  Yesterday the FNMA benchmark bond was down 11 basis points, closing at 104.14.  This morning it is up 1 basis point at 104.15, 21 basis points of its low.  Rates are fantastic and I would feel very good about locking now.  My guess is that if tomorrow's jobs numbers are strong, we could see a decent sell-off in the bond market with traders taking some profits on more solid economic news.

I'll be back tomorrow with the news on Friday's data.  Until then, make it a great day.

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