Stocks go tic, bonds go tock. With stocks struggling to find their footing, bonds, notes, and MBS continue with a positive tone. Nothing huge as stocks are off a dozen and fixed income (mortgage backed securities) are up a few 32’s.
Earlier today, the ADP Employment estimates for Friday hit the tape with job losses of 298K. The street was looking for a minus 213K print. Productivity and Unit Labor Costs were also released. Productivity rose .2% to 6.6% while Unit Labor Costs slipped 5.9% from 5.8%. The sharp drop in employment has reduced the slack in output. In other words, those who are still employed are producing more and receiving less compensation. Hummmmmmmm.
Interesting talk this morning from the Vice Chairman of the Mortgage Bankers Association, drumming up support for a new mortgage backed security. They call it “McG”, something new that would not involve Fannie and Freddie but would carry a government charter, backed by private insurance to relieve tax payers of any reps and warrants. They are suppose to take it to the hill in October, recommending that legislators put a fence around Fannie and Freddie and let them work out of their mess. Fat chance as tax payers currently have 100 billion invested in the duo.
Factory orders were just released, up 1.3%, much better than economists expected. A sharp increase in civilian aircraft orders did the trick. Take the transportation component away and the number was actually negative at -.07%. Looks like cash for clunker, junkers, and flyers at work here. From our technical vantage point, 10 year note futures are back to the July highs (low yield mark of 3.34%). Stability at these levels is helping to maintain bullish chart reading but has not eliminated the possibility of a false breakout. With the volatile jobs report due out Friday at 7:30 am cst, chances are good that the market will take a breather and hedge itself up for the event.
With Austin mortgage rates possibly improving, this is a good time for borrowers to get off the fence. Not that we’re bearish, just cautious of a market going into the Employment report at such lofty, overbought levels. More on our bias and possible outcomes tomorrow afternoon.