Locking here is the safe play

Mortgage bonds are down slightly this morning, and the stock market is continuing to fall.  The first of three employment reports was released this morning, with ADP reporting 175,000 new jobs created in the month of January.  This is in line with the 170,000 expected.  If you remember, last month’s ADP reporting was 238,000, and was revised lower down to 227,000 today.  When you compare last month’s ADP report of 227,000 to last month’s BLS report of only 74,000, it makes you wonder if there will be a strong revision higher to the BLS figure this Friday when they are set to announce their estimate of January’s reporting.  Should this happen, this will be a negative for mortgage rates and positive for stocks.

Bonds have fallen from their recent multi-month highs, and are still battling overhead resistance.  With tomorrow’s unemployment claims report and Friday’s BLS Employment Report, the remaining days of the week could be very volatile.  We are going to play it safe and have a locking bias.  We feel there is more risk of either strong upward revisions to the BLS Employment Report, or a large “catch-up” number reported.  Of the two, a strong revision to last month’s reporting will likely have less impact than a strong number reported for January to interest rates.  Should we get a figure at or high above the 189,000 expected, mortgage bonds will likely fall, taking interest rates higher in the process.