It’s Jobs Week

Bond markets absorbed a second day of brutality on Monday, with prices being pushed down beneath their 100-day moving average. Since this was the last significant moving average holding bond prices up, we are setting new lows not seen since early May.

Premarket trading shows that stocks are near flatline. This is good news for stock investors, as it shows the lack of concern over North Korea’s missile launch yesterday. If bond investors are lucky enough to have stocks take a breather today, we could see mortgage bonds get a little support. This would be a helpful break for bonds as they look to find a floor in this rapidly deteriorating rate environment.  Further, if stock investors realize what is at stake should the issue over North Korea’s actions heat up, that would also help stabilize interest rates.

It’s jobs week, with ADP set to announce their estimate of new hires for the month of June tomorrow, and the more significant report from the Bureau of Labor Statistics (BLS) set to announce their estimate on Friday.  Markets are estimating in the 170,000 range for each of them. However, keep in mind that the month of June is generally a strong month with students finding summer jobs and seasonal businesses expanding their payrolls. As a result, we could be in for a blockbuster number.  This would add additional upward pressure to mortgage interest rates.

Today is the release of the Federal Reserve’s meeting minutes from their last FOMC meeting. Since rates were pushed higher in that meeting, we anticipate the minutes to reflect continued optimism in the US economy. This will not likely be taken positively by the bond market, so rates could face significant headwind today.
With mortgage bond prices remaining below their 100-day moving average, we will maintain our locking bias.