Mortgage Bond Market Analysis - ADP Private Payrolls Wednesday

With the first jobs report of jobs week, the ADP Private Payrolls report blew away expectations with a reading of 257K vs. expectations of 192K.  The FNMA benchmark bond that was up nicely this morning has paired back it's gains.  This has been the theme this week with Monday seeing the bond get as high as 103.53 and closing 28 basis points off the high at 103.25.  Yesterday it was as high as 11 basis points above the open for the day and closed up 7 basis points at 103.32 (not a big deal).  This morning the bond was up 29 basis points before the ADP report and sold off as many as 20 basis points before rebounding a bit - it is currently up 14 basis points at 103.46.  The ISM Non-manufacturing report comes out in about an hour (8:00 AM EST) and my guess based on these numbers is that it will be strong - at least a lot stronger than the manufacturing numbers we got on Monday.

ISM Non-Manufacturing numbers:  Expectations were for 56.4 but the actual reading came in at 55.3.  While this is a miss, the number is still very strong as anything above 50 is expansionary and this is solidly above 50.  Contrarily, Factory Orders were expected in at -.2% which is exactly what they came in at.  This is significantly below last month's reading of 1.5.  A weak stock market is really the impetus for the recent gains but I wouldn't bet on the continued buying of bonds, at least not through Friday's unemployment and non-farm payroll numbers.  Locking now is fine considering the recent gains but I would probably float with caution through tomorrow (though you are risking a surprise in the FOMC minutes this afternoon if you do that) and lock by tomorrow afternoon's close.  As always, when you are floating, watch the market closely so that you can be ready to act quickly in case the market moves against you.

I'm happy to help you however I can and I would really love to earn your business and help you with a mortgage (702-812-1214 or 801-853-8720).  I will be unavailable today until the later part of the afternoon.  In the meantime, make it a great day.