May 6th, 2021 10:31 AM by Richard Sardella MLO.100007700/NMLS 233568
Before the 8:30 am ET release of weekly jobless claims, the 10 yr. note traded at 1.57% -1 bp, after the claims 1.58% unchanged from yesterday. The initial reaction to claims in the MBS market wasn’t much, -2 bps from yesterday’s close.
Weekly claims at 498K on forecasts of 533K, the prior week though claims were revised from 553K to 590K. Claims after the revision -92K, the weekly average of claims continues to decline, down to 560K from 621K the week before. The decline in claims is a new fresh pandemic low. Businesses hiring as the pandemic fears lessen, still though many workers at the lower end of the wage scale are staying home with stimulus and unemployment checks equal more than what they make working. Unless the foundation is solid with hard-working Americans filling the entry-level jobs, the growth won’t be as robust as otherwise; the lower rung of the ladder has to be supportive for the upper steps to sustain a rapid return toward normal. The worry is if labor shortages persist, especially in the leisure and hospitality industry, that could slow demand and possibly lead to price increases. And anyone who previously made less than $32,000 per year is better off financially in the near term receiving unemployment benefits, according to economists at Bank of America. The reasons potential workers are holding back: fear of getting Covid, lack of child care, and the enhanced unemployment benefits.
Q1 productivity and unit labor costs were better than estimates, +5.4% against forecasts of +3.7%. Unit labor costs down 0.3%, but stronger than -0.6% estimates. Labor costs in Q1 still not increasing but a little stronger than estimates; another labor cost comparison that clouds near-term inflation thoughts.
At 9:30 am ET, the DJIA opened +47, NASDAQ -26, S&P unchanged. FNMA 2.5 30 yr. coupon at 9:30 am -6 bps from yesterday’s close and +4 bps from 9:30 am yesterday.
All eyes are on tomorrow’s April employment data. What occurs today in markets is the prep toward what traders and investors expect to see. Estimates are wide-ranging, the consensus for non-farm jobs +938K, the range of estimates, 755K to 1.250 mil. Private jobs consensus 853K with a range of forecasts from 780K to 1 mil. Unemployment rate 5.8%, down from 6.0% in March. Average hourly earnings consensus +0.1%, the range -0.3% to +0.2%; yr./yr. consensus 4.2% unchanged from March, the range +3.7% to +4.5%. The closely watched labor participation rate is expected at 61.6%.
Interest rates remain stable, boiling it all down to its common denominator, inflation outlooks. After the swift increase in rates the past months, the 10 yr. and MBS markets have calmed down, driven by the present outlook that inflation, while on its way, isn’t here yet and may stay low. The Fed and Treasury forcefully jawboning that any slight increase in inflation will not be much, and if it occurs, it won’t last long. Before bitcoins, gold prices were a good indicator of inflation outlooks; for months, gold has been quiet with little change, until the last few days. Its price over the last five sessions has increased from $1750 to this morning’s explosive rally to $1810.
PRICES @ 10:00 AM ET
10 yr. note: 1.57% -1 bp
5 yr. note: 0.79% -1 bp
2 Yr. note: 0.16% unch
30 yr. bond: 2.24% -1 bp
Libor Rates: 1 mo. 0.105%; 3 mo. 0.169%; 6 mo. 0.200%; 1 yr. 0.279% (5/5/21)
30 yr. FNMA 2.0: @9:30 101.05 -9 bp (+5 bp from 9:30 yesterday)
30 yr. FNMA 2.5: @9:30 103.81 -6 bp (+4 bp from 9:30 yesterday)
30 yr. GNMA 2.5: @9:30 103.72 -6 bp (+2 bp from 9:30 yesterday)
Dollar/Yuan: $6.4669 -$0.0067
Dollar/Yen: 109.25 +0.05 yen
Dollar/Euro: $1.2065 +$0.0059
Dollar Index: 90.92 -0.39
Gold: $1809.10 +$24.80
Bitcoin: 57,296 +441
Crude Oil: $65.13 -$0.50
DJIA: 34.204 -26
NASDAQ: 13,485 -97
S&P 500: 4154 -13
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.