Remember when a massive 651,000 loss in headline nonfarm payrolls and a jump in the nation jobless rate to 8.1% (its highest mark since December 1983) would have spawned a towering rally in the mortgage market highlighted by notably lower mortgage interest rates??
News of the dismal dimensions reported this morning use to send capital screaming out of the equity markets and other macro-economic sensitive investment vehicles into the relative safe haven of Treasury obligations and mortgage-backed securities. But that's all so "old school" now.
Today the fact that "only" 651,000 jobs were "actually" lost in a single month draws nothing more than a disinterested passing glance and a yawn from mortgage investors. Why? Because the "whisper" numbers had mortgage investors bracing for a headline job loss of 800,000 or more. Since the "worst-case" scenario did not develop - many observers think a "relief rally" in the mortgage market might be possible before the day is out. While I would agree such an outcome is possible - I don't think it is very probable.
It is far more likely mortgage investors will spend the balance of the day doing some profit-taking and squaring up positions in front of next week's $63 billion Treasury auction. The unrelenting pressure created in the credit markets by the government's gargantuan appetite for capital will continue to hold ultimate trump over all other conditions and events - making it inescapably difficult for mortgage interest rates to move significantly lower from current levels. That is not to say there won't be days or perhaps even a week or two of improving conditions in the mortgage market - but eventually the law of supply and demand will reign supreme - you know the one I'm talking about - "when supply exceeds demand prices fall." In our world when prices fall - rate rise.
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