Markets Prepare for Job Report

Mortgage bonds are higher this morning, as political news adds an uncomfortable level of uncertainty to the markets.  President Trump recently admitted to not being truthful in his comments surrounding a payment made to keep an alleged affair secret. Yesterday it was made public that he did in fact reimburse his attorney for the monies she received in exchange for her silence.  However, President Trump stated the payment did not violate campaign contribution laws.  Regardless, the markets don’t like uncertainty and this is certainly adding to the ongoing unrest surrounding the topic.

Yesterday’s Federal Reserve meeting went as anticipated, with the Fed not choosing to raise interest rates at this time. The key concern was a shift in the verbiage used to explain inflation, which shifted from being “below” to words that state the Fed anticipates hitting the desired levels within the medium term. This adds pressure to the interest rate market, as inflation is the arch enemy of any fixed return asset.

Tomorrow we will receive the Bureau of Labor Statistics’ estimate of new job creations in the month of April. While the market is anticipating a figure around 191,000, I feel there is a strong chance we will see the actual report come in above this level. This is heavily based on the low reading in the prior month as well as the low levels of unemployment claims.  I believe it will be a bit of a “make up” month where gains are stronger to shore up the weak number of April.  That would not be good news for mortgage interest rates.

We will suggest a locking bias ahead of the BLS Report.