Phil Grossfield's Blog

FIRE!!!  Here’s a little advice I now offer you after first-hand experiencing this morning…after you buy a delicious pastry from your local neighborhood non-chain coffee shop, and after you bring it home to split and share with your lovely adorable wife, and before you stick it in the microwave for eleven seconds in an attempt to warm it up to the perfect temperature, I strongly advise you take your tasty pastry out of the paper bag the coffee shop person so thoughtfully placed it in.  Of course, if you do not remove your tasty pastry from the paper bag, the microwave will try to do it all by itself.  Voila…FIRE!!!

My reaction to this delightful event was not much different from Tom Hank’s reaction to building fire in the movie Castaway – at the 55 second point.

My Market Watch:  Bonds Down -26bps.  Jobs Report Comes In Strong.  The Fannie Mae 30-Year Bond is down -26bps since yesterday’s close.  A lender’s rates/pricing get worse when the bond loses ground…prices are worse today.  Hopefully you followed my advice yesterday and locked in ahead of this morning’s report.

This morning the Jobs Report came in at 175,000 new jobs. That’s a lot more than what was expected…25,000 more.  Since traders only expected 150,000 new jobs to be reported, the economy appears to be stronger than thought.  When traders feel the economy is stronger they want to invest in the stock market, so, they sell off bonds to free up Capital. When traders sell off bonds our rates/pricing worsen.

The Unemployment Rate has a similar analysis.  It came in at 6.7% which is just slightly higher than the expected 6.6%.  Although this means there is more unemployment, which indicates a weaker economy, it wasn’t enough to counter the big Jobs Report number. At best, maybe it kept the bond from losing even more ground.

Because the bond is now trading lower new moving averages are in play.  Traders are watching the bond’s movement to decide when and if it’s a good time to start buying again, or, if they should keep selling.  As long as the bond trading doesn’t escalate one way or the other this afternoon rates/pricing should stabilize.

Below is a 12-month recap of the Jobs Reports, courtesy of MBS Highway: