22 Oct Locking Bias
With little news to drive the markets, mortgage bonds will once again trade heavily based on the technical picture today. So far today, the stock market is significantly higher. This hurt mortgage bonds initially this morning. However, they have managed their way back to near unchanged levels. With bonds trapped in a tight range, we will likely continue to see bonds bounce from the bottom of the range up to the top and back. Unless bonds are able to move one way or the other, the trading days will seem mundane.
Initial Unemployment Claims for the week ending 10/17 were reported to be 259,000. Although this was 3,000 above last week’s number, it was 6,000 lower than anticipated by the markets. Some analysts are throwing cold water on the recent drop in weekly claims, pointing out that the current standing of where we are in the business cycle is the reason for the low numbers and not a sign of exuberant strength in the job market. Layoffs in many segments of the labor force are still happening. However, there are sufficient jobs available as replacements to keep people from filing for unemployment benefits.
With bonds continuing to show a lackluster performance, we will maintain our locking bias.