How Big Could Friday’s Jobs Report Be?

How Big Could Friday’s Jobs Report Be?

Thursday ended up being a very calm day relative to most of the recent context.  MBS lost an eighth and 10yr yields moved up a few bps, but both are still right in line with their best levels in months.  There were no stand-out market movers and no notable pops in one direction or the other.  With that, our fate is in the hands of the Bureau of Labor Statistics, as is so often the case.  We’re not going too far out on an analytical limb in saying a big miss or beat would likely have the logical impact on rates.  But what are the stakes? The report would have to be truly awful for a realistic challenge of the 4.0% level in 10yr yields and truly stellar in order to facilitate a similarly large move in the other direction.  Reality is more likely to fall somewhere in between, but keep in mind that the AVERAGE beat/miss is roughly 50k and 100k respectively, so anything’s possible.

Econ Data / Events

Jobless Claims

220k vs 222k

Continued Claims

1861k vs 1910k f’cast, 1925k prev

Market Movement Recap

08:38 AM Modest additional selling after Claims. 10yr yields are up 6bps at 4.174 and MBS are down 10 ticks (.31).

12:06 PM Decent recovery in AM hours.  10yr up only 1.2bps at 4.125.  MBS down an eighth.

04:32 PM Modest weakness into the PM hours.  10yr up 2.9bps at 4.148.  MBS down 3 ticks (0.09). 

Mortgage Rates Roughly Unchanged Today, But Probably Not Tomorrow

If you’re reading this on Thursday, December 7th, it is the day before the big jobs report–the one that has all the potential in the world to cause huge reactions for interest rates.  It’s not that lenders are watching the economic data and then guessing at how to adjust their rates in response.  Lenders are watching the bond market to determine the true value of the loans they originate and the bond market is watching the economic data! Bond traders will be the first to tell you, if there is one monthly economic report with the most consistent track record of inspiring volatility for bonds/rates, this is it.  This particular installment is more interesting than normal given the transition that’s been taking place in terms of other economic data and the Federal Reserve’s assessment of the economy. In not so many words, the economy is coming off the boil and even the Fed has been willing to acknowledge that.  But the Fed is also pragmatic, saying that we don’t have enough data to confirm that the corner toward lower rates has officially been turned.  Bottom line: tomorrow’s jobs report provides another important step in that confirmation process.  If it’s much stronger than expected, rates will likely bounce back up.  If it’s weaker than expected, rates should continue lower (or hold their recently achieved low ground, at the very least). As for today, it was forgettable in terms of rate movement, but still quite nice in the sense that the average lender remained in line with the lowest levels in more than 4 months.

No Major Volatility Ahead of Friday’s Jobs Report

Thursday didn’t exactly have any high risk events from a data standpoint with weekly Jobless Claims being the most notable report. Claims came in very close to consensus while continued claims fell back below 1.9m.  One could argue that there was a brief selling response in bonds, but it didn’t last.  Most of the AM weakness was a factor of overnight movement, apparently led by sharply weaker Japanese government bonds (a rare catalyst for US bonds).  As the AM hours wind down, Treasuries are now just barely weaker on the day.  MBS are down only an eighth of a point after starting out down nearly 3/8ths.

Bulk Sales, Best-Ex, Accounting Outsourcing, Verification Tools; FHA and Ginnie News; STRATMOR Tech Survey

Time flies (see joke at bottom), and here we are at Pearl Harbor Day already. “I’m a multitasker. I can listen, ignore, and forget all at the same time!” Occasionally someone will accuse me of having a sense of humor. If true, it can be traced back to my parents, but a portion of it came from watching Norman Lear’s shows like All in the Family, Sanford and Son, Maude, The Jeffersons, and movies like The Princess Bride (“as you wish”). Mr. Lear died yesterday, but his impact will be long felt. Audiences loved his shows. Does your customer love you, no matter the price? That’s the case with Coke. The average price of a 12-ounce can of Diet Coke in a package of 12 was 34 cents in 2018 but hit 56 cents per can in October 2023, a 65 percent increase. In general, Diet or regular, prices have shot up: The average price of a Diet Coke at a restaurant hopped up from $2.05 to $2.77. Inflation at many levels is impacting rates, including Treasury and mortgage-backed securities: STRATMOR’s current blog is titled, “How Treasury Auctions Influence Mortgage Rates”. (Today’s podcast can be found here, and this week’s is sponsored by nCino, makers of the nCino Mortgage Suite for the modern mortgage lender. nCino Mortgage Suite’s three core products, nCino Mortgage, nCino Incentive Compensation, and nCino Mortgage Analytics, unite the people, systems, and stages of the mortgage process. Hear an interview with United One’s Sean Higgins on the vendor status of full-service mortgage, credit reporting, fraud solutions, appraisals, title insurance, and loan closing support.)