CHM Blog

Yesterday ADP reported private jobs up 597K jobs, this morning the BLS reported private jobs up just 149K, another example of how the two reports can differ. NFP payrolls increased 209K against estimates of 213K, May NFP jobs revised from 339K to 306K. The unemployment rate at 3.6% as expected, down from 3.7% in May. Average hourly earnings though to be +0.3% increased 0.4%, year/year earnings expected at 4.2% increased 4.4%. The lab or participation rate unchanged at 62.6%. Prior to report the 10 year traded at 4.08% +4 bps, the immediate reaction sent the yield down to 4.01%, that lasted about 1 minute before the 10 climbed back to 4.08% +4 bps. FNMA 6.0 coupon knee jerked to +6 bp, following the 10 by 9 am ET traded down 11 bps.

The NFP jobs at 209K is the lowest read since Dec 2020. The unemployment rate at 3.6% was expected after a huge increase from April to May (3.4% to 3.7%). The Fed has been speculating by year end the unemployment rate would be 4.1%; doesn’t look like that is likely with the strong lab or market. The increase above forecasts for average hourly earnings, both month/month and year/year (+0.3% month/month and +4.4%) won’t escape the Fed attention, Powell concerned about the strength of the labor markets as one element that worries the Fed.

At 9:30 am the DJIA opened -140, NASDAQ -9, S$P -12. 10 year note 4.07% +3 bps. FNMA 6.0 30 year coupon at 9:30 am -14 bps and -3 bps from 9:30 am yesterday.

The report this morning doesn’t take away the Fed will increase the FF rate on the 26th. Technically the near term is approaching overbought for the 10 year note. Next week we will get inflation readings from CPI and PPI. Nothing this morning has changed the outlook, a 25 bps rate increase is now widely expected after weeks of debate among investors and traders. Equity markets may take the increase in earnings to believe a soft landing instead of a prolonged economic slide, seeing consumers still able to continue spending.

PRICES @ 10:00 AM

10 year note: 4.06% +2 bp

5 year note: 4.34% -1 bp

2 year note: 4.96% -4 bp

30 year bond: 4.04% +3 bp

30 year FNMA 6.0: @9:30 am 99.89 -14 bp (-3 bp from 9:30 am yesterday)

30 year FNMA 5.5: @9:30 am 98.34 -12 bp 9-11 bp from 9:30 am yesterday)

30 year GNMA 5.5: @9:30 am 98.41 -11 bp (-1 bp from 9:30 am yesterday)

Dollar/Yuan: $7.2265 -$0.0235

Dollar/Yen: 142.45 -1.62 yen

Dollar/Euro: $1.0921 +$0.0029

Dollar Index: 102.74 -0.42

Gold: $1929.50 +$14.10

Bitcoin: 30,265 -0.50

Crude Oil: $72.00 +$0.20

DJIA: 33,897 -25

NASDAQ: 13,727 +48

S&P 500: 4415 +4

Richard Sardella has been actively managing and providing services in the mortgage industry for over 30 years. Richard serves on the board of directors as President of Colorado Home Mortgages Inc.

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MLO of record MLO.100007700 / NMLS#233568 / CHM NMLS#127716.