06 Nov Locking bias
After falling beneath support yesterday, mortgage bonds have slid lower. This has continued to push mortgage interest rates higher. Based on the current trend, it appears imminent that bonds will fall down to the next level of support at the 50 day moving average. Although it may not happen today, it would be likely if tomorrow’s Bureau of Labor Statistics Jobs Report comes in stronger than expected. The markets are anticipating that 240k new jobs were created in the month of October, and that the Unemployment Rate will hold steady at 5.9%. A strong improvement from these levels will further pressure mortgage rates higher and the stock market higher as well.
Unemployment Claims for the week ending 11/1/2014 were reported at 278k. This is a drop of 10k from the week prior, and below the market’s expectations of 283k. This was the second lowest report of the economic recovery, bringing the 4 week average of claims down to its lowest level in 14 years at 279k. The continued strength in claims further supports a strong jobs report release tomorrow. Typically, when companies are holding on to more employees, they are also adding as well.
We believe there is a greater chance of tomorrow’s BLS Jobs Report coming in at expectations or stronger than there is of having a surprisingly weak report. Therefore, we are going to continue with our locking bias. Hopefully, after we get the report out of the way tomorrow, we will see bonds and the stock market at least take a break. We are nearing one month of steadily increasing interest rates and a rapidly increasing stock market. The current path is not sustainable for much longer, meaning both markets are due for a breather. With the markets still seeing Tuesday’s election results as a reason to celebrate, it is not likely that will happen today. It will likely take getting tomorrow’s report out of the way before the current path can be interrupted.