The trading session has started out with great volatility this morning, with the stock market falling sharply right out of the gate. This has helped improve bond prices, boosting mortgage bonds above their 50 day moving average. In addition, the 10 Year Treasury Note yield fell below support of the 25 and 50 day moving averages, which is also helping the mortgage bond market improve. However, a repeat of yesterday’s trading pattern is once again likely. We can expect mortgage bonds to give up some of their gains at some point today. Although it may be in late day trading, the improvements could easily be reversed as the day drags on.
ADP released their estimates on new job hires for the month of December, showing much stronger than anticipated growth in the job market. It was reported that 257,000 new jobs were created in the US. Since the market was only expecting 190,000, this may set the stage for a stronger than anticipated Bureau of Labor Statistics (BLS) report scheduled for release Friday morning. A look back on history shows that December is often a strong month for new jobs created. However, this makes complete sense as retailers, restaurants and other service related industries add additional staff to keep up with the demands of Christmas shoppers. For that reason, we feel the market’s anticipated figure was unreasonably low.
Recent history shows that times when mortgage pricing is slightly improved, such as right now, provide excellent opportunities to secure an interest rate. Therefore, we will maintain our locking bias.