Job Growth Explodes Higher

The bond market is falling sharply today, adding upward pressure to mortgage interest rates. Although this is also a technical move lower (which I will explain in a minute), the market is reacting to the Bureau of Labor Statistics (BLS) report that showed there were 304,000 new jobs created in the month of January. Since this far exceeded the 158,000 anticipated, bond investors are clearly nervous about this headline report. Although there were negative revisions to the tune of 77,000 to the prior two months’ reports, the strength of the labor market is one key component the Fed looks at when deciding the rate strategy, and this component of the rate decision clearly supports higher rates.

In looking at the bond chart, mortgage bond pricing hit up against a strong ceiling of resistance provided by the 50% Fibonacci level. Since this is a standard stopping point in a market rally, (such as the one we have experienced in the mortgage bond market the past couple of months) a break above this would be a rare exception. Although I do believe we will eventually break above this critical level, I don’t see that happening without a very weak piece of economic or political news hitting the market. Since we knew the job number would at least come in ok, we could easily assume the next step would be for rates to deteriorate a bit in the near term.

We will take a deeper dive into the report in our market update on Monday. There are some key points of concern that we will analyze.

We will maintain a locking bias.