3/5/10

Both the stock and bond markets improved on Thursday, which was nice to see. Both the initial and continuing jobless claims posted week-over-week drops, causing traders to ratchet their estimates for today’s jobs data downward, and pending home sales dropped. Greece began selling 5 billion Euros of 10-yr debt after promising to reduce Europe's largest budget deficit, which included wage cuts that has prompted more protests. Right now, the futures market is pricing in an 86% chance that the Fed keeps rates somewhere between 0% and .25% through June 23rd, 2010. But a rumor swept the markets yesterday that a very large buyer in 4.5% securities moved mortgages relative to Treasury rates. Supply from lenders (read: locks) has increased lately as rates have crept back down.
This morning’s news, however, has really moved interest rates initially. Non-Farm Payroll “only” dropped by 36,000, and the unemployment rate held steady at 9.7%. Hourly Earnings were up, and the average workweek was down slightly. Rates shot up on the news, as did the stock markets. Call it a knee-jerk reaction, and sometimes you wonder if the market conveniently forgets that the unemployment rate is still near 10%, but stock market futures did indeed rally on the news, and mortgage prices worsened by upwards of .250 in price.