Mel's Blog

Mortgage Bonds are trading higher within a volatile, wide trading range.  Bonds have been down as much as -12bp and up as much as +22bp so far this morning.  This after a Jobs Report that contained huge revisions, weak job creations, and an improvement in the rate of unemployment. 

As we have become accustomed to, the initial headline numbers reported for job creations have almost been reduced to just a guess.  And this month's report showed a net loss of 17,000 jobs...instead of the expected gain of 70,000.  This number is sure to fan the flames of "conspiracy theorists", who firmly believe the Fed had access to this lousy number, when they cut the Fed Funds Rate by 50bp two days ago.  The job loss during January represents the first time a negative number has been posted since August of 2003.  But don't be surprised if this changes over the next two months with revisions.  There were some enormous revisions to previous month's readings - November was lowered to 60,000 jobs from a prior reading of 115,000 and December, which initially showed 18,000 new jobs was raised to 82,000.  All in all, these big revisions netted an additional 11,000 new Jobs during the two months.  

Adding to the confusion was a surprising drop in the Unemployment Rate, edging back down to 4.9% - which seems to contradict what you'd expect from such a lousy Report, that shows more jobs lost than created!   Average Hourly Earnings crept higher by $0.04 or 0.2% to $17.75 matching expectations, and earnings overall gained 3.7% during the course of 2007. 

Stocks have also been all over the place so far this morning, led by headlines that Microsoft is making a bid to acquire Yahoo.  Currently, Bond prices are pressed up against the difficult to beat resistance level at the Upper Trend Line, and I'll be watching carefully, but Float on today's modest gains for now.