Great time to lock in

Despite further signs of weakness in the labor market, mortgage bonds are down slightly so far this morning.  Initial Jobless Claims for the week ending 5/7 were reported to be 294,000.  This was 20,000 above the prior week’s report of 274,000 and 27,000 higher than estimates of 267,000.  Claims have remained beneath 300,000 for 62 straight weeks, which is the longest run since 1973.  Given that claims are now just 6,000 below the critical 300,000 level, this could be an initial sign of weakness developing in the labor market.  Once again it is important to note that recessions don’t start when the labor market is weak, they generally begin while the labor market is strong. 

Mortgage bonds remain above the critical 25 day moving average.  Further, the 10 Year Treasury Note yield remains well beneath its 25 DMA as well and is now developing into a sideways trading pattern.  With the 10 YTN yield near all-time low levels, it will likely take a significant market development in order to force the yield even lower.  At this point, there are not any significant reports imminent in the immediate future that would likely cause such a move.  Therefore, we anticipate more sideways trading in the short term. 

With a low probability of major improvement in the markets today, it is a great time to lock in on transactions needing to close in the short term.