Good Thursday AM from your Hometown Lender,
Rates are marginally better than yesterday.
Reprice risk today is low. This is the calm before the storm of tomorrow’s BLS jobs data. If you have not heard me say it before, do not float into tomorrow’s report. Floating will be gambling. Yesterday, however, brought surprise improvements for pricing, with a strong reaction to a very weak ADP private payrolls number and even more reaction to a weak ISM services number (points to economic weakness).
The 10-yr Treasury yield dropped the most since April, and both the 10-yr and mortgage bonds broke through technical resistance without a second glance. The fact that both are holding the improvements this morning is a great sign, and means that we are likely to see an even stronger reaction to tomorrow’s jobs report.
If tomorrow’s BLS jobs data comes in showing labor market weakness, we will see bonds rally further and rate sheets will improve some more. There is certainly a floor for how far down rates will go, and it’s not that far… but the improvement on rate sheets could still help bring rates down a bit heading into next week’s CPI inflation data.
HOWEVER…
If tomorrow’s data comes in stronger than expected, markets will likely now react strongly and we will likely see all of yesterday’s improvements to rates wash away and then some.
On yesterday’s ADP report, in a Truth Social post following the data’s release, Trump attacked Federal Reserve Chair Powell and urged him to cut interest rates. ”‘Too Late’ Powell must now LOWER THE RATE. He is unbelievable!!!” the president wrote.
Today’s unemployment claims report shows more weakness in the jobs market with claims rising again, and now at the highest in 9 months. Cracks are beginning to appear in the strong labor market. Much more worryingly, however, are continuing claims. They too have been steadily rising since 1/1/25, and are now at 1.919 million, the highest level since 11/13/21. Few get fired, fewer get hired.
If the employment picture continues to weaken, rates will be improving… but it is never a straight line up or down.
Stay safe and make today great!