The Bureau of Labor Statistics (BLS) released their estimate of new job creations for the month of January. As predicted, the number came in stronger than expectations at 227,000. Although this is a strong number, there are several details within the report that kept bonds from falling sharply following the report. Primarily, wage growth was anemic, with Average Hourly Earnings increasing only $.03. This brings the annualized rate of growth down from 2.9% to 2.5%. This shows a moderating rate of wage pressure inflation, which is largely why mortgage bonds are higher. In addition, the prior two months of job gains were reduced by a total of 39,000. Further, the Unemployment Rate moved from 4.7% up to 4.9%. Overall, the bond market is celebrating the news.
From a technical standpoint, mortgage bonds are currently above their 50-day moving average. Whether or not they are able to maintain their position remains to be seen. With bonds not having been convincingly above this level since early October 2016, there is a great chance we will see bonds fall as the day wears on.
Although there is no immediate need to rush to lock, bonds remain volatile. We generally see significant changes on days when job reports are announced. Therefore, we will maintain our locking bias.