Mel's Blog

The Bond market is holding steady on a slow news day.  But the action heats up big tomorrow with the important Jobs Report at 8:30am ET. 

In today's news, Initial Jobless Claims were reported at 307,000, which was basically in line with expectations.  The data suggests the labor market is holding steady for the time being.  It will be interesting to see how this report reads in coming weeks with cutbacks in the sub-prime, housing and financial sectors.  

Jobs Report Strategy

Economists are expecting 135,000 new jobs to be created for the month of July.  But I see the Report coming in worse than expectations and closer to the 100,000 level.  Why?  The Housing and Financial sector sure isn't doing a lot of hiring at this time.  Moreover, while Initial Unemployment Claims haven't spiked higher yet, we feel they will as housing and mortgage-related layoffs increase.  And although the ADP Employment Report hasn't been the best indicator for the official Jobs number, we feel that they got the direction correct in their latest report in that the number of reported jobs will be less than economist's forecast.

Even though technicals take a back seat when an important news item like the Jobs Report is released, we are encouraged by the fact that the Bond is trading above a layer of Moving Averages at the 25, 40 and 50-day MAs, which should act as support heading into tomorrow.  Bonds appear to be in a good position to move higher and should the Jobs Report come in below expectations, prices may receive a nice boost. 

My advice is to float conforming fixed rate loans into tomorrow's Jobs Report.  But all bets are off for non-conforming loans as the instability of liquidity is causing non-conforming loans to carry higher than normal premiums in price.  Therefore it is best to play it safe and lock non-conforming loans.