Mortgage Rates Continue to Drop

Mortgage rates moved lower for the 6th day in a row today, bringing them in line with the best levels in more than a month.  A mixed bag of data this morning and the April employment data on Friday locked the rate markets into little movement today. On the weak economic side ADP reported job gains 37K less than estimates at 156K private jobs.  Q1 productivity was down, about in line but the lack of productivity is a warning sign the economy is slowing.

On stronger side, April ISM index jumped more than what was anticipated, with new orders, the employment, and the prices paid components all showing strong increases.  March factory orders were also up more than anticipated.

Interesting news out of China as the Chinese government is coming down hard on its economists about the how negative they are and that they are defying the government’s efforts to paint the pig gold? It is hard enough for analysts to get a solid grip in China’s economy with the government believed at times to be manipulating the data, going to be more difficult in the future.

Tomorrow weekly claims, along with the Challenger jobs report comes out tomorrow.  Presently a lot of opinions about the Fed (that of course is not news) but there is an overall sense that the Fed is about to increase rates in June. Markets however are taking it one step at a time, not betting on it or against it. Opinions are evenly balanced between those that believe and those that don’t believe it. Friday’s employment data may carry a lot more emphasis than usual as weekly claims have declined to the lowest levels in many years but today’s ADP jobs report makes me wonder why the disconnect with most still believing BLS will report job growth +200K on Friday, the unemployment rate down to 4.9%, and average hourly earnings +0.3%.

Stocks rule now. Yesterday the indexes dropped and the 10yr note yield dropped and MBS prices increased. Today most of the day the indexes were under pressure, still closed lower on the day but when the DJIA was down 140 points the 10yr was down on the day to 1.77%, into the last 30 minutes the indexes recovered somewhat, the 10yr did not move much but its yield gave back a basis point. The technicals are moving slower than a snail crossing an interstate now - barely bullish but not enough strength to press to hard by floating.

In summary, bonds posted small gains today while waiting for Friday's NFP jobs report.  Both Treasury yields and MBS prices have broken their 25/50/100 day moving averages, which is typically a bullish sign.  My conservative side says "lock up the gains, get while the getting is good", while my risk taking side says "we could improve from here, wait a while."  At any rate, the biggest float/lock decision is tomorrow, for now.