Good Friday AM,

Well sort of… The jobs report came out and blew past any expectations by almost double. Payrolls came in at 353k, with strong back-month revisions, and continues to point to a strong labor market. The unemployment rate came in unchanged at 3.7 percent when it was expected to tick up to 3.8 percent. Hourly earnings were up .6 percent for the month, incredibly strong, and was a dagger. You can imagine what happened next. Knowing that employment is a critical component of Fed rate policy, and the growth was enormous, traders are coming to grips with a cut in March is not likely and there may not be 6 rate cuts this year. The 10-yr has backed up all the way to 4.04% and mortgage bonds are off 30bps. It’s not terrible but it’s certainly a gut punch. Stocks, on the other hand, in the face of expanding growth in labor are doing well.

All is not lost…this is a great paragraph from Rob Chrisman:

“The Federal Reserve does not set mortgage rates, but the same factors that influence its Open Market Committee’s decisions impact the bond markets, and in turn mortgage rates. Barring some monumental event, the Committee is on hold until March, but that doesn’t mean that the bond market is frozen until then. We should continue to see slights moves in rates, up and down, based on economic news from the United States and around the world as investors guess where rates are going over the long term. Even with the Federal Reserve’s preferred gauge of underlying inflation cooling to an almost three-year low, Chair Powell struck a cautious tone in his post-FOMC press-conference on Wednesday, saying that the committee needs to see more progress prior to cutting interest rates. As inflation continues to fall, an unchanged fed funds rate means that inflation-adjusted rates are rising. This could force the Fed to cut rates to maintain the current level of monetary tightness”

Please stay safe and healthy, enjoy the weekend, and make today great!