September 3rd, 2021 9:07 AM by Richard Sardella MLO.100007700/NMLS 233568
Prior to 8:30 am ET the 10 yr. note 1.30% +1 bp; MBS prices -5 bps from yesterday.
At 8:30 am the August employment data: the unemployment rate expected at 5.2% was 5.2%. Job gains didn’t meet forecasts, NFP jobs expected +740K were up just 235K but July NFP jobs were revised higher to 1.053 mil from 943K. Private jobs expected 693K reported at 243K, July revised top 798K from 703K. Average hourly earnings increased more than thought, to +0.6% twice 0.3% forecasts, yr./yr. earnings +4.3% with estimates at 3.9%; July revised to 4.1% from 4.0%. The labor participation rate at 61.7%.
The reaction sent MBS prices lower. The negative reaction primarily due to the strong upward revisions in July and the better average hourly earnings. The unemployment rate at 5.2% was as expected and down from 5.4% in July, a strong month to month increase. Job creation in August fell short of forecasts, both last Wednesday’s ADP jobs and this morning’s BLS numbers; likely the softer jobs are driven by the spread of the Delta variant in August. Job growth in August was the lowest in seven months. In August, 5.6 million people reported they were unable to work because of the pandemic, up from 5.2 million a month earlier, the Labor Department said. There was a 42K decrease from July in leisure and hospitality.
Softer job growth would normally be a positive for interest rates, suggesting the economic growth may be stalling, that isn’t the initial reaction. Traders are focusing on the strong increase in average hourly earnings and tying it to the Fed’s thinking that inflation isn’t a long term issue. Still, jobless claims, a proxy for layoffs, reached a new pandemic low of 340,000 last week. Many employers also report difficulty filling job openings, which touched record highs this summer. Online job postings in the U.S. increased 13% in August from July, according to job site ZipRecruiter.
At 9:30 am the DJIA opened -88, NASDAQ -13 bp, S&P -8. 10 yr. 1.33% +3 bps. 2.0 FNMA coupon at 9:30 am -14 bps from yesterday’s close and -3 bps from 9:30 am yesterday. The 2.5 coupon -14 ps and -5 bps from 9:30 am yesterday.
At 10 am August ISM non-manufacturing index was expected at 62.0, as released 61.7.
Probably not going to see any significant improvement from morning levels of MBS pricing; the markets will be closed on Monday, usually short term traders go into long weekends with a conservative bias. The 10 yr. has very key technical support at 1.37%. We don’t agree with how the markets are taking this morning’s employment data. Markets still reacting to the 8:30 am data; should settle down the remainder of the day. The MBS markets at 9:30 am this morning down just 4 bps from 9:30 am yesterday, lenders however may be conservative with their prices.
PRICES @ 10 AM ET
10 yr. note: 1.33% +4 bp
5 yr. note: 0.79% +2 bp
2 Yr note: 0.21% unch
30 yr. bond: 1.95% +5 bp
Libor Rates: 1 mo. 0.082%; 3 mo. 0.117%; 6 mo. 0.147%; 1 yr. 0.222% (9/2/21)
30 yr. FNMA 2.0: @9:30 101.30 -14 bp (-3 bp from 9:30 am yesterday)
30 yr. FNMA 2.5: @9:30 103.75 -14 bp (-5 bp from 9:30 am yesterday)
30 yr. GNMA 2.5: @9:30 103.14 -28 bp (-5 bp from 9:30 am yesterday)
Dollar/Yuan: $6.4390 -$0.0178
Dollar/Yen: 109.75 -0.18 yen
Dollar/Euro: $1.1885 +$0.0010
Dollar Index: 92.13 -0.10
Gold: $1823.70 +$12.20
Bitcoin: 50,744 +1218
Crude Oil: $70.11 +$0.12
DJIA: 35,3322 -122
NASDAQ: 15,273 +41
S&P 500: 4533 -4
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.