Job Losses Ahead?

Mortgage bonds are losing steam so far this morning, as they don’t yet have the strength to climb above a critical level at this point.  If bonds are able to climb above their prior peak, it would indicate the beginning of a trend reversal.  Since break outs are the exception and not the rule, odd remain in the favor of bond prices falling in the near term.  However, there is still hope.  It would likely take a more precipitous fall in the stock market to see mortgage interest rates improve from here.  We will wait and see what happens.

Initial Jobless Claims is one report we are closely watching.  We see a major slowdown in the labor market coming in months ahead.  The first step is to see the pace of new job creation slow.  The Bureau of Labor Statistics (BLS) reports from 2019 confirm that this is already underway.  Next, we will see employers begin to lay off portions of their workforce.  In the most recent two weeks, we have seen the number of new Unemployment Claims rise.  These are just initial signs of what I believe will be a much deeper problem here soon.

Mortgage bonds still don’t have the strength to break out of the current cycle.  We will maintain a locking bias.