19 May We will maintain our locking bias
The release of the Federal Reserve’s April FOMC meeting minutes caused panic in both the stock and bond markets. Mortgage pricing worsened as investors digested the news being thrown out by the media that the Federal Reserve members implied that if the Jobs data, Inflation data, and economic growth were to continue to improve, it may be appropriate to hike rates when the Fed meets in June. However, much of the reaction was triggered by a media that failed to note that the statements were made three weeks earlier, in which time we received a miserable Jobs report and evidence that inflation actually moderated.
In today’s news, it was reported that 278,000 new Unemployment Claims were filed last week. Although this represents a decrease of 16,000 from the week prior, it was still the second highest number reported in the past 15 months. It is important to note that new claims have remained beneath 300,000 for 63 consecutive weeks, making this the strongest run since 1973! This was also the “Sample Week” used to help figure the Bureau of Labor Statistics (BLS) Job growth data for the month of May. Therefore, it will be used to contribute to next month’s report on job growth. When compared to the month prior, it is a higher number of new claims reported. Therefore, it will support fewer new hires in the final announcement.
After breaking beneath multiple layers of support, bonds are now looking to find stability. However, they are now directly under the floors and making multiple layers of overhead resistance. That could provide a headwind as the trading day wears on. Although we hope for a continued rally, the reality is that we remain in the midst of a strong downward trading channel. Therefore, the safe play is to maintain our locking bias.