January 10th, 2025 8:41 AM by Richard Sardella MLO.100007700/NMLS 233568
Prior to 8:30 am ET the 10 year note was at 4.70%; the initial reaction to the employment report sent the 10 year note up 8 bps to 4.78%, the 2 year note jumped 10 bps. The report is shocking. The estimates for NFP jobs 157K as released 256K, private jobs expected 130K reported +223K. November jobs originally reported +227K revised to 212K, private jobs in November originally 194K revised to 182K. Average hourly earning +0.3% down from +0.4% in November, year/year average hourly earnings +3.9% down from 4.0%. Manufacturing jobs thought to be +10K reported at -13K. The unemployment rate declined to 4.1% from +4.2%. The initial reaction sent the 10 year note to its highest since November 2023. The initial reaction on MBS prices, -35 bps at 9 am.
Looking for anything positive in the report, the year/year decline in average hourly earnings although with the job market roaring a little slip will be shoved under the rug. Yesterday two Fed officials, Fed governor Michelle Bowman and KC Fed president Jeff Schmid both said the 100 basis points in rate cuts since September has brought the Fed’s benchmark rate down to “neutral,” where it neither dampens or boosts demand. “My read is that interest rates might be very close to their longer-run level now,” Schmid said in a speech to the Economic Club of Kansas City. He said he is in favor of adjusting policy gradually going forward “and only in response to a sustained change in the tone of the data.” “The strength of the economy allows us to be patient.” On Wednesday Fed governor Waller commented, “I do think they are restrictive, but not enough to throw us into recession,” Bowman said yesterday she continues to be concerned that the current stance of policy “may not be as restrictive as others may see it”… “While it is not my baseline outlook, I cannot rule out the risks that progress on inflation could continue to stall.”
At 9:30 am the DJIA opened -224 after declining 310 on the reaction to the employment report, NASDAQ -185, S&P -43. 10 year at 9:30 am 4.76% +7 bps. FNMA 6.0 30 year coupon at 9:30 am -33 bps from yesterday’s close and -45 bp from 9:30 am yesterday. The 6.5 coupon, which is now the lead coupon, at 9:30 am -21 bps and -32 bp from 9:30 am yesterday.
More key data: at 10 am the University of Michigan consumer sentiment index, expected at 74.5, declined to 73.2.
December CPI and PPI next week.
PRICES @ 10:00 AM
10 year note: 4.75% +6 bp
5 year note: 4.54% +8 bp
2 year note: 4.35% +8 bp
30 year bond: 4.96% +3 bp
30 year FNMA 6.0: @9:30 am 99.83 -33 bp (-45 bp from 9:30 am yesterday)
30 year FNMA 6.5: @9:30 am 101.83 -21 bp (-32 bp from 9:30 am yesterday)
30 year GNMA 6.0: @9:30 am 100.34 -27 bp (-31 bp from 9:30 am yesterday)
Dollar/Yen: 158.00 -0.14 yen
Dollar/Euro: $1.0258 -$0.0043
Dollar Index: 109.49 +0.31
Gold: $2,726.70 +$35.90
Bitcoin: 93,803 +1944
Crude Oil: $77.30 +$3.38
DJIA: 42,253 -382
NASDAQ: 19,157 -322
S&P 500: 5847 -71
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.
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.