Jobs Market: “Cold as Ice”

Jobs Market: “Cold as Ice”.  Stocks are higher and looking to set all-time highs today, while Mortgage Bonds are trading near unchanged levels so far this morning.

Yesterday’s 10-year Note Auction had below average demand, but there was strong foreign demand, which is shown by direct and indirect bidders taking down 80% of the auction vs the 12 month average of 75%. As a result, it did not have much of an impact on MBS prices, but yields did move a little lower on the 10-year.

Today’s 30-year Auction at 1:00pm EST will be important and can move the markets.

Fed Chair Jerome Powell spoke yesterday and said that the jobs market is “cold as ice” and that the Fed is willing to sacrifice increasing the debt to help the economy. He made it clear that this is not the time to think about hiking rates or stopping their purchases of MBS and Treasuries.

Here is a quote from what he said, which is exactly what we said after Friday’s jobs report: “Without misclassification errors that have plagued the Labor Department since the pandemic began in March, the unemployment rate would be closer to 10%.”

And speaking of the soft labor market, Initial Jobless Claims, which measures individuals filing for unemployment benefits for the first time, decreased by 19k to 793,000. But there were revisions of 33,000 to last week, completely eliminating the improvement.

Continuing Claims, or those that continue to receive benefits, decreased by 145,000 to 4.5M.The Pandemic Unemployment Assistance Claims, which gives individuals benefits who would not usually qualify, and Pandemic Emergency Claims, which extends claims by 13 weeks after regular benefits expire, increased by 1.5M and 1.2M, respectively.

The total number of continued benefits in all programs for the week ending January 23 was 20M, an increase of 2.6M from the previous week. There were 2.2M weekly claims filed for benefits in all programs in the comparable week in 2020. Bottom line – The unemployment picture is not getting any better and actually got a lot worse from last week.

Mortgage Bonds are testing an important and solid floor of support at their 200-day Moving Average. A break beneath this level would signal a sea change, as Bonds typically trade above or below this level for extended periods. We do believe this level will hold, however. The 10-year is now down to 1.14% and is in the middle of the range. If today’s 30-year Auction is strong, we could see an improvement in Bonds and Treasuries.

Continue Floating.

LenderSelect Mortgage Group