April 5th, 2021 9:52 AM by Richard Sardella MLO.100007700/NMLS 233568
Last Friday’s March employment report was a shocker with way more jobs than were thought. March NFP jobs were expected at 658K, as reported +916K; Feb jobs revised from 379K to 468K. Private jobs increased 780K on estimates of 550K, and Feb private jobs revised from 465K to 558K. The most jobs in seven months with improvement across most industries. The unemployment rate declined 0.2% to 6.0% as expected. What wasn’t expected, though, was the decline in average hourly earnings, thought to be +0.2%, as reported -0.1% and yr./yr. 4.2% against forecasts of +4.6%. The slippage in average hourly earnings helped keep the 10 yr. note from leaping to new highs. Taking upward revisions in Feb and the March data, 1.384 mil NFP jobs: private jobs for the two months 1.338 mil for a total of 2722 mil jobs the last sixty days. That isn’t enough; according to the National Federation of Independent Business (NFIB), the demand for more job hiring still can’t hire enough.
The 10 yr. note last Friday bumped up 4 bps to 1.72% on the strong increase in jobs, but as I said above, the increases would have been stronger had the average hourly earnings been positive. This morning the 10 yr. note notched up to its recent high at 1.74%, where it found support again for the fifth time.
The WSJ has an interesting piece today; why maybe the supply of homes to buy has dwindled. DH Horton built 124 homes in the Houston area but didn’t sell them, they rented them and then put the whole community, Amber Pines at Fosters Ridge, on the block. They were sold for $32B, which gave Horton a 50% gross margin. From individuals with smartphones and a few thousand dollars to pensions and private-equity firms with billions, yield-chasing investors are snapping up single-family houses to rent out or flip. They are competing for houses with ordinary Americans, who are armed with the cheapest mortgage financing ever and driving up home prices. “You now have permanent capital competing with a young couple trying to buy a house,” said John Burns, whose eponymous real estate consulting firm estimates that in many of the nation’s top markets, roughly one in every five houses sold is bought by someone who never moves in. “That’s going to make U.S. housing permanently more expensive,” he said.
At 9:30 am ET, the DJIA opened +275, NASDAQ +105, S&P +31. The stock market was closed on Friday, catching up with the strong jobs data Friday. FNMA 2.5 30 yr. coupon at 9:30 am +5 bps from Friday’s close and unchanged from 9:30 am Friday morning.
At 9:45 am ET, the final PMI March index was expected at 59.2, as released 59.7.
At 10:00 am ET, March ISM non-manufacturing index expected 58.6 increased to 63.7. No reaction to the strong index.
Also, at 10:00 am ET February, factory orders were thought to be down 0.6%, declined by 0.8%.
The 10 yr. is at a critical level this morning. Earlier, the note increased to 1.74% that has stopped any selling for the last two weeks, at 10:00 am 1.72% the fifth time it found support. If, when, the note breaches 1.75% on a close, the outlook would project it to increase to 2.0% and mortgage rates up another 15 bps in rate. The more times the support holds, the more optimistic the outlook, there is still potential that the note could fall to 1.60%. Regardless of the technical outlook, interest rates are going to increase. Biden spending plans and tax increases will boost inflation concerns.
PRICES @ 10:00 AM
10 yr. note: 1.72% unch
5 yr. note: 0.97% -1 bp
2 Yr. note: 0.19% unch
30 yr. bond: 2.38% +2 bp
Libor Rates: 0.110%; 3 mo. 0.199%; 6 mo. 0.201%; 1 yr. 0.280% (4/1/21)
30 yr. FNMA 2.0: @9:30 99.78 +3 bp (-3 bp from 9:30 Friday)
30 yr. FNMA 2.5: @9:30 102.61 +5 bp (unch from 9:30 Friday)
30 yr. GNMA 2.5: @9:30 102.80 -5 bp (-6 bp from 9:30 Friday)
Dollar/Yuan: $6.5669 unch
Dollar/Yen: 110.29 -0.41 yen
Dollar/Euro: $1.1799 +$0.0039
Dollar Index: 92.77 -0.26
Gold: $1727.00 -$1.40
Bitcoin: 58,054 +24
Crude Oil: $59.89 -$1.56
DJIA: 33,458 +305
NASDAQ: 13,617 +136
S&P 500: 4061 +41
Richard Sardella has been actively managing and providing services in the mortgage industry for over 27 years. Richard serves on the board of directors as President of Colorado Home Mortgages Inc.
All information furnished has been forwarded to you and is provided by thetbwsgroup only for informational purposes. Forecasting shall be considered as events which may be expected but not guaranteed. Neither the forwarding party and/or company nor thetbwsgroup assume any responsibility to any person who relies on information or forecasting contained in this report and disclaims all liability in respect to decisions or actions, or lack thereof based on any or all of the contents of this report.
MLO of record MLO.100007700 / NMLS#233568 / CHM NMLS#127716.