Lock ahead of jobs report

Yesterday’s report warned of the potential of bonds falling in overnight trading.  Unfortunately, that’s exactly what happened.  Mortgage bonds opened once again beneath their 200-day moving average.  The fight over this level has been drawn out for the past six trading days, with four of those being days where bonds fell below this critical level.  It still seems likely that this battle will be lost and mortgage rates will be driven higher.  However, much depends upon tomorrow’s Bureau of Labor Statistic’s Jobs Report.  If the number comes in significantly softer than the 165,000 or so anticipated, bonds could see temporary improvement.  However, a number too far beneath that level doesn’t appear likely now.  We must wait and see what tomorrow brings.

The US stock market has been under significant pressure the past week or so, as investors seem to be positioning themselves for a pending interest rate hike when the Fed meets next in December.  Weakness in stocks has been partially fueled by falling oil prices that were driven lower partially due to excess supply.  News out of Nigeria of an attack on one of their pipelines is helping support higher oil prices this morning, which could give the US stock market a boost today.  This will help add headwind to trading in the bond market, which isn’t welcome news for those hoping for lower mortgage interest rates. 

With bonds beneath their 200-day moving average, we will suggest a locking bias heading into tomorrow’s job report.