1)      Non-Farm Payrolls – Plus 60K

2)      Private Payrolls – Plus 75K

3)      Unemployment Rate – 9.6%

4)      Hourly Earnings – Plus .1

5)      Average Workweek – 34.2 hours

Our bias for tomorrow’s release is for slightly better numbers that market consensus.  We feel that Non-farm payroll figures will post the first positive reading since May at plus 75K.  Our “guess” is predicated on better ISM Manufacturing Survey employment figures, census worker fluctuations being a thing of the past, a pickup in construction jobs due to better housing starts, and private sector employment continuing to add new workers.

Using one standard deviation, the print should come in between a positive 83k and positive 37K.  More than 100K and less than 25k would be considered “outliers” and definitely move the market.  We like the unemployment rate to be unchanged at 9.6% but would not be surprised to see 9.5%.  We agree with market consensus on Hourly Earnings and Average Work week projections.  What are others saying?

1)      Wells Fargo – Plus 29K at 9.6%

2)      Barclays – Plus 60K at 9.6%

3)      UBS – Plus 70K at 9.6%

4)      RBS – Plus 75K at 9.6% (We think they have it right)

5)      JPMorgan – Plus 110K at 9.6%

Market reaction favors steady to slightly worsening Austin mortgage pricing.  With the rally over the past few days, risk reward in not in your favor, Austin mortgage borrowers, unless the print reflects negative jobs growth.  At the same time, the Bernanke trade is still the game and will continue to support bond and mortgage pricing for as far as the eye can see.  Just the same, this report creates so much volatility that it is best to lock your interest rates now.  Hard to lose when you use PrimeLending’s world-famous float down option!

Better to be a live dog than a dead lion!

After yesterday’s FOMC meeting, it became apparent that the Fed would pull out all the stops in an effort to get the economy and employment going again.  “Asset” purchases are all the rage as the government is once again the buyer of choice (treasuries).  Stocks love the idea of free money and a weakening dollars, boosting value in equities across the board.

Gold is up $40.00 as well, pricing in heightened expectations of inflation down the road.  Seems to me that the Chairman and the Prez met by the water cooler and the conversation when something like this.  “Ben, I’m in a tough spot here, my party just got its head handed to it and unemployment is nearly 10%, now I’m not telling you what to do but……… I need a game changer.  What you say we fire up the printing press and go on a buying spree.  Just a thought.”

In the news, Weekly Unemployment Claims jumped 20K to 457K while 3^rd Quarter Productivity rose 1.9%.  No one noticed as traders were too busy trying to buy bonds and stocks.  With the Employment Report for October due out at 7:30 am cst tomorrow, the prudent thing for Austin mortgage borrowers is to lock their Austin mortgage rates now.

Given that we are at the best levels in a month, your timing couldn’t be better in front of such a high profile release.  We’ll preview the Employment Report early this afternoon.

Technically, trading has been a whipsaw affair.  You will notice the downdraft yesterday (post FOMC) and the reversal this morning.  Typically a good indication the market has run its course in the short run, especially in front of the high profile data coming tomorrow.  Just the same, this baby is a bull and will be well supported into year-end given the Fed and their reloaded check book.  Call the market neutral/bullish.  Take advantage as the Employment trade is always volatile.

Japan chimed in, announced an interest rate move from .1% to 0.  They also have announced a plan to purchase government fixed income assets, hopefully allowing the Yen to fall and improve their export business.  Seems as though QE is going global.

Earlier today, the ISM Manufacturing Index rose nearly two points to 53.2.  The index unfortunately is still below the first half of the year and reflects GDP growth of 1.8% to 2.0%.  Stocks have had a nice day, starting with gains in Europe.  Currently, the Dow is up 187 points while the Naz has tacked on 54 points.

Under “normal” circumstances, one would expect Austin mortgage pricing to be getting its head handed to it.  Not so fast my quantitative fans.  10 year notes are up and mortgage backs are unchanged.  Don’t expect much of a down draft in pricing unless the Employment Report, due out Friday at 7:30 am cst is plus 200K or higher.  More on that Thursday.

Following Friday morning’s better than expected Employment report, Austin mortgage rates moved higher. Against a consensus forecast for a decline of 110K jobs, the economy lost 54K jobs in August. Temporary census workers accounted for a loss of 114K jobs, and the private sector added 67K jobs. The June and July figures saw significant upward revisions as well. The Unemployment Rate rose to 9.6% from 9.5%, matching expectations, as the labor force grew by about 550K workers.

After several months of housing data which has failed to meet expectations, this week’s data contained relatively good news. Investors were expecting July Pending Home Sales to remain at June’s record low levels, but instead they rose 5% from June. Pending sales are a leading indicator for the housing market, so home sales may pick up a little in coming months. The chief economist of the National Association of Realtors (NAR) expects “improved affordability conditions” to boost home sales, but warned that a housing market recovery will be a “long process.”

Tomorrow’s one day FOMC meeting will hold the key as any interest rate changes/policy changes will be released at 1:15 pm cst.  Some feel the Fed will take a baby step towards purchasing more securities (treasuries) to keep interest rates low.  Others talk more spending or tax cuts, infrastructure spending, a payroll tax holiday (like that one), and government backed guaranteed loans to small business.

Technically, it’s hard to find anything standing in the way of this bull.  The chart shows you how Friday’s trade took out the trend line that has capped the market for the past month.  Traders will now be looking a target of at least 2.75% – 2.78%.  The only thing we see that could derail the move is 84 billion in auction paper (3’s, 10’s and 30 year bonds) coming this week.  Keep in mind that the market has priced in a lot of bad news, even the high probability of a double dip.  With that in mind and the fact we’re trading at or near historic low yields, best bet is for Austin borrowers to lock in today’s great Austin mortgage rates and move on down the road.

Friday’s important Employment report reflected a slowly improving labor market. The economy lost -125K jobs in June, which was very close to expectations. The figures include a loss of -225K census workers who completed their temporary assignments. The private sector added 83K jobs. The Unemployment Rate fell to 9.5% from 9.7% in May, but this was due to 650K people leaving the labor force. The labor force consists of everyone in the US who either has a job or is looking for one, and the Unemployment Rate measures the percentage of the labor force without jobs.

There was mixed news in the housing sector this week. May Pending Home Sales declined 30% from April, as many buyers rushed to sign contracts ahead of the April 30 deadline to qualify for the homebuyer tax credit. On a more positive note, the “close-by” deadline for the homebuyer tax credit has been extended to September 30. Although the tax credit is not available for new contracts signed after April 30, extremely low Austin mortgage rates and high home affordability levels make conditions very favorable for home purchases.

In the glass half full category, Ford, Chrysler, and GM all posted sales gains as that sector starts to stabilize.  Currently, stocks are off 61 points on the big board, 10 year note is plus 8/32’s, and mortgage backs are off 2 to 5/32’s, depending on the interest rate.  As I have talked about in the past, money flows are coming out of foreign sovereign debt and into treasuries.  Trouble is, that’s as far as the money goes.  Risk/reward is moving more and more towards risk in MBS, corporate paper, and anything other than an instrument backed by the full faith of Uncle Sam.  With stocks trading firmly below 1040 on the S&P chart, investors are net bearish, looking for a pull back to 940/970.  That would clip the Dow for 1 large.  Add to it the uncertainty of tomorrow’s Employment Report and all you see is traders with a fist full of scared money.

Speaking of the jobs number, the call is for job losses of 100K.  We’ll preview the report later today.  Given what we know, we see the pull back in mortgage paper (higher Austin mortgage rates,  lower pricing) as nothing more than consolidation, expecting that it will not become a major reversal.  However, we are seeing a divergence set up on the daily chart, telling you that a least a pause is in order until tomorrow’s fireworks begin (7:30 am cst).

With risk reward not in your favor, Austin borrowers are advised to lock in their Austin mortgage interest rates and step aside as we’re not sure whether the light in the tunnel is the end or a train.

The Employment Report did not disappoint, posting a plus 290K jobs with the unemployment rate at 9.9%. Services and Manufacturing sectors had gains of 166K and 44K respectfully.  Even construction added 14K.  Consensus workers (temp positions) rose 66K.  Back month revisions (higher) were also posted for February and March.  Overall, the economy has gained over 500K new jobs in 2 months. If not for the situation in Greece/Euro-zone, this would have been a “Katie bar the door” game changer for bonds, notes, and mortgage backs.  Nonetheless, both stocks and bonds have been quite volatile this morning, trading in a wide swinging range.  Currently, stocks are off 125 on the big board (range down 185 to up 20).  Mortgage backs have been down as much as 15/32’s to down 4/32’s.

The roller coaster will continue to be in play as Germany’s Parliament just passed the bailout package for Greece.  France approved the package yesterday.  Markets like this are dangerous as fear makes a strange trading bedfellow.  Overall, once Greece becomes a back burner issue (and it will), the focus will be on our economy which is starting to turn the corner.  That will inevitably lead to higher Austin mortgage rates.  Not that much higher but just the same, not the levels you are seeing now.  Borrowers are smart to lock their Austin mortgage rates NOW.

1)      Nonfarm Payroll – Plus 200K

2)      Unemployment Rate – 9.7%

3)      Average Hourly Earnings – Plus .1

4)      Average Workweek – 34.1

Given the data we have, standard deviation mathematics, regression analytics, and the Ouija board, we’re comfortable with the 200K number or just slightly less (say 190K).  The unpredictability here comes from the weather related rebound and the number of census worker hired, both hard to handicap.  The household survey points to a much stronger number, up 264K while the ADP estimates out yesterday point to plus 32K.  That spread is big enough to drive a truck through.  Manufacturing and Construction will also be a key with expectations that both are showing signs of improvement.  Strength in the Philly Fed Survey, Empire State Survey and IMF Manufacturing data gave us that tip.  Construction jobs took a beating with the cold weather so more spring like temperatures should show a little pent up demand and hiring in the sector.  Private sector jobs look to be flat to slightly improved and temporary jobs are still increasing, albeit at a slower pace that seen in the first quarter.  So, we’ll place our bet on plus 190K Nonfarm payrolls, 9.6% unemployment rate, and Average Hourly Earnings and Average Workweek to come in on the consensus screws.  What are others saying;

1)      JP Morgan – Plus 145K and 9.7%

2)      Credit Suisse – Plus 165K and 9.6%

3)      RBS – Plus 185K and 9.7%

4)      Wells Fargo – Plus 200K and 9.7%

5)      Barclays – Plus 200K and 9.6%

Expected reaction to an as advertised report should favor stocks and bother bonds.  Reason being is that it would mark two consecutive months of job creation with a “getting better all the time” feel.  We still need to get to 250K just to break even given attrition.  Over 250K should give stocks a lift and punish our pricing for about .25 to .50.  Anything less than 50K would hold Austin mortgage rates steady and probably put another whippin’ on stocks.  With all that is moving markets these days, only the almighty know where we’ll be this time tomorrow.  Best bet for borrowers is to lock your interest rate NOW and buckle up!  Should be a wild ride.

In this current enviornment, markets are more complex than ever and the flow of money with it’s associated risk can be powerful and detrimental.  The trend is changing and even though we don’t like it, a “new normal” for Austin mortgage rates is in the works.

The large channel dating back to last year, which gave us a series of lower highs and lower lows in yield has now been breached.  Phase two was the triangle formation that was trapped between 3.29% and 3.81%, winding itself tighter and tighter headed for a breakout.  That breakout happened yesterday and if you remember our comments a couple of weeks ago, our bias carried a high probability of that breakout leading to higher yields.  Wished we were wrong.

Damage done, it’s time to move on and get back to business.  Earlier today, Weekly Unemployment Claims fell 14K to 422K.  Continuing Claims also fell.  Both are not indicative of a trend but a better reflection of improving weather across the country and government consensus hiring.  Bill Gross, often refered to as the “bond god”, is talking about how he’s bearish on bonds and feels that stocks are a better buy.  He also commented that he expects to see the 1 year TBill rate at 1.25% to 1.50% within a year.  Today’s rate is .41%.

Currently, the 10 year note is off 14/32’s (yield 3.87%), mortgage backs are off 16/32’s, and stocks are on fire, up 100 points on the big board.   With the upward trend gaining momentum, the 10 year note is on a clear path towards 4.0% plus.  Best case on any rebound/reflex rally is back to 3.75%/3.77%.

We all know why the trend is higher but here’s some of the factors that could stop the selling and improve Austin mortgage pricing:

• One would be a good 7 year note auction today (12:00 cst).
• Two is month-end buying by hedge funds and money managers to extend duration.
• Three being weaker than expected Employment Report next week.  The market is looking for a gain of 200K.

Markets like this are very dangerous.  They can travel to higher yields beyond where you think they can.  They can stay over sold for long periods of time.  The bottom will not be put in until the last person sells.  On the bright side, markets do not go down forever, it just feels like it.  Hang in there.