Mortgage Bond Market Analysis - The Beginning of Jobs Week

Happy Monday and welcome to Jobs Week.  In my Friday post, I said that I doubt we'd see a big move the rest of the day - the FNMA benchmark bond was up 15 basis points at the time and it end the day up 21 basis points so it squeaked another 6 basis points out for the day.  I also said that I didn't think there was a lot of upside so it's a good time to lock; of course, I'm not a fan of floating into the release of jobs data so there is that peril this week if you / your client isn't locked.  This morning, the bond was down as much as 21 basis points.  We have seen a bit of volatility as it improved through the early part of the morning and was actually up 4 basis points at one point but is now currently down 11 on the day at 103.96 which is 2 basis points below the 2nd level of resistance.  The RSI is just below the overbought threshold so that's a bit of improvement but it's expected with the sell-off.

The July ISM Manufacturing Index came in at 52.6, just below estimates of 53 but still a strong number as any number over 50 is expansionary.  This is a good follow-up from Friday's Chicago PMI data which was quite strong at 55.8 and much better than the expectations of 54.  On the downside (mixed data - go figure), June Construction Spending was - .6% vs. estimates of +.5%.  This is a big miss and helping to support current pricing levels.  Tomorrow we get Personal Income, PCE (Personal Consumption Expenditures) and Personal Spending and then Wednesday / Hump Day get's us started on the jobs data with the ADP Private Payrolls.  We also get the ISM Non-manufacturing Index as well.  With little reason for lots of bond buying, I think the upside is low and thus I would recommend locking.  If jobs numbers are much weaker than expected then we could see some improvement which you might be able to take advantage of with a float down.  That said, with the strong manufacturing numbers that we have had recently, I wouldn't expect the jobs numbers to be weak.  That's all for today; I'll have another report on Wednesday and then I'll be out of town for 10 days - I'll try to get some info out but in my absence, there's buyerZapp that you can download via the link in the upper right-hand corner of my blog.  Make it a great day and a better week.