At 815am ADP reported its Private Jobs data for January; forecasts were for an increase of 200K jobs, as reported +170K. ADP revised December job growth from 325K to 292K. Prior to the report the 10-Year Note traded lower by 8/32 and the reaction to the weaker report was briefly back to unchanged but by 900am was down by -6/32 with MBS prices at 900am down -1/32 (.03 bp). U.S. equity market trading prior to the open at 930am had indexes trading higher in line with better markets in Europe. On Friday the BLS report is forecast to show the U.S. added 145,000 jobs, according to 81 economists in a separate survey, compared with 200,000 the previous month. The unemployment rate is forecast to remain steady 8.5%.
China reported an unexpected increase in manufacturing today which spurred rallies in Europe’s markets. Borrowing costs in Italy fell slightly on sales to the lowest since October as stock gains spurred demand for riskier assets. Portugal’s notes rose as borrowing costs declined at bill sales. The German 10-Year yield rose two basis points, or 0.02 percentage point, to 1.81% at 152 p.m. London time after falling to 1.78% yesterday, the lowest since January 18, and the same yield as US 10-Year Notes.
At 930am the DJIA opened up +75, the 10-Year Note down -10/32 back to 1.83% (+3 bps) and MBS prices -3/32 (.09 bps).
Weekly MBA mortgage Applications for last week will be out at 700am today. mortgage applications decreased 2.9% from one week earlier, for the week ending January 27, 2012. The refinance Index decreased 3.6% from the previous week. The seasonally adjusted Purchase Index decreased 1.7% from one week earlier. The four-week moving average for the seasonally adjusted Market Index is up 4.11%. The four-week moving average is up 2.48% for the seasonally adjusted Purchase Index, while this average is up 4.22 % for the refinance Index. The refinance share of mortgage activity decreased to 80.0% of total applications from 81.3% the previous week. The average contract rate for 30-Year Fixed mortgages with conforming loan balances ($417,500 or less) decreased to 4.09% from 4.11%, with points decreasing to 0.41 from 0.47 (including the origination fee) for 80% loans. The average contract interest rate for 30-Year Fixed mortgages with jumbo loan balances (greater than $417,500) decreased to 4.33% from 4.39%, with points increasing to 0.41 from 0.40 (including the origination fee) for 80% loans. This is the lowest 30-Year jumbo rate since MBA started tracking the series in January 2011. The average contract interest rate for 30-Year Fixed mortgages backed by the FHA decreased to 3.96% from 3.97%, with points increasing to 0.61 from 0.57 (including the origination fee) for 80% loans. The average contract interest rate for 15-Year Fixed mortgages decreased to 3.36% from 3.40%, with points increasing to 0.41 from 0.40 (including the origination fee) for 80% loans. The average contract interest rate for 5/1 ARMs increased to 2.94% from 2.91%, with points decreasing to 0.39 from 0.41 (including the origination fee) for 80% loans.
Next up, at 1000am, January ISM Manufacturing Index,expected at 54.5 from 53.9; as reported 54.1 from a revised 53.1 in December; New Orders Index 57.6 from 54.8. Employment at 54.3 from 54.8 and Prices Paid at 55.5 from 47.5. Not much of an initial reaction in either stock indexes of the bond and mortgage markets.
Finally today, December Construction Spending was expected up 0.4%, as reported was up +1.5% but November was revised lower to +0.4% from +1.2% as originally reported.
The Treasury announced next week’s quarterly refunding detailsthis morning; a total of $72B, $3B more than last month on the 30-Year Bond.
Technically, the 10-Year Note has once again found resistance at 1.80% for the moment. The overall low yield was 1.70% back on September 23, 2011. At the present level the 10-Year Note and MBS’s are looking a little overbought based on momentum oscillators. If the bond market has run out of fuel, technically we would continue a bullish outlook as long as the 10-Year Note doesn’t move above 1.93%. MBS’s have support at 103.08 bps, presently at 103.25 bps.
