Overnight, European banks got a boost on lower than expected funding needs and a successful rollover of 3 month paper. Stocks abroad liked the news which in turn carried over to stateside trading. Bonds, notes, and mortgage backs trade as if they are tired. Nothing huge but at the moment, we are off 6/32’s on current coupon MBS and down 6/32’s on the 10 year note (yield 2.99%).
The tactical bias is still a bullish one as traders look to buy the dip into month end/quarter end extension needs. ADP Jobs expectations hit the tape plus 13k for June, well below the consensus call of plus 60K. ADP estimates that manufacturing gained 16K, goods producing jobs lost 17K, and services jobs rose 30K. Once again, small business jobs growth produced the bulk of the services sector jobs. Expectations for Friday’s Employment Report are still looking for a loss of 110K. Not a pretty picture. Chicago Purchasing Managers Index was also released, dipping slightly to 59.1. The number was right on expectations.
For now, it looks like fast money is taking profits on the longer end of the curve (10’s through 30’s) as the note dips below 3.0%. Real money buyers are in the mix, picking up most of what’s out there for sale. With the contagion in Europe and domestic housing/employment woes in vogue, it’s hard to see the market doing much of anything. The chart reveals much of the same. Stalls have held above support as higher highs and higher lows are being produced. Overall supportive but just the same, the market has come a long way in short period of time. Some type of consolidation would not be a surprise at all. Currently, mortgage backs are off 6/32’s.
Odds of a worsening Austin mortgage price change are starting to rise. Be careful out there.