The fearful tone in yesterday’s market update proved to be a foreshadow of how mortgage bonds would perform in afternoon trading. After many failed attempts to break above overhead resistance, the market completely lost steam and bounced lower. The velocity of the downward move was strong enough to break through key floors of support that were holding 30-year conventional mortgage rates near all-time lows. As a result, mortgage rates moved up about 1/8%, and the damage is continuing today. Bonds now have a way to fall before hitting their next floor of support. Therefore, hang on. It could be a bumpy ride for a bit!
Initial Jobless Claims for the week ending 4/6/2016 were reported to be 247,000. This represents a drop of 6,000 from last week’s unrevised figure of 253,000, and happens to be the lowest unemployment claim number since 1973! To put that in perspective, that means that the last time we had so few people make unemployment claims in a single week, our current president was 11 years old. This is a strong indicator of job growth for the month of April, which could be a set up for higher mortgage interest rates as a result. The US job market growth has been extremely strong for many months now. With the heavy hiring months of summer ahead of us, this could just be the beginning.
With mortgage bonds continuing to suffer, we will maintain our locking bias.