Rates At 2011 Lows Ahead of Friday Jobs Report

Today is the fourteenth straight day of mortgage bond gains, and rates drop when bond prices rise like this. Mortgage bonds are up 38 basis points today (FNMA 30yr 4% coupon as of 3:20 ET) and now sitting 78 basis points above the previous 2011 high set March 16. The big drivers keeping the bond rally going this are slowing activity from yesterday’s ISM Non-Manufacturing report, and jobless claims spiking 43,000 to 474,000 for the week ended April 30. This is the third week of higher jobless claims, and readings above 400,000 signal trouble.

Given the jobless claims trend and yesterday’s lower than expected jobs reading from ADP, some think tomorrow’s jobs Bureau of Labor Statistics (BLS) jobs report could be less than 185k expectations, pushing rates even lower. But bonds are priced for perfection, so unless the jobs report is a huge downside surprise, rates should remain the same, or perhaps rise slightly as mortgage bond traders sell and take profits.