Mortgage Rates



Generally a quiet open this morning with treasuries fractionally weaker but MBS prices with a minor improvement. At 9:00 the 10 yr -1/32 at 1.84% and MBSs +2/32 (.06 bp). 8:30 data; weekly jobless claims were expected to increase a few thousand, as released claims fell 12K to 367K; continuing claims at 3.437 mil frm 3.567 mil last week. Continuing claims the lowest since Sept 6th 2008. Q4 non-farm productivity was right on +0.7%, Q3 productivity was revised from +2.3% to +1.9%. The dip in productivity in Q4 implies higher prices to some extent, however that isn’t likely with the US economy soft. Also at 8:30 Q4 unit labor costs were expected +0.7% but increased 1.2%; again implying higher end costs for some goods; also again, there is no pricing power in the economy now.

At 9:30 the DJIA opened +11, the 10 yr -2/32 at 1.84% +0.5% and MBSs +2/32 (.06 bp).

Still waiting; the world is waiting patiently for how Greece will dodge the default bullet. Greece and its creditors are locked in talks over a debt-swap deal for the nation. Bondholders last week lowered their demands for an average coupon on the new debt they would get after European officials demanded they take steeper losses. The ECB is likely to refuse to show its hand on how it will help cut Greece’s debt burden until the deal is reached. Two weeks ago Greece officials were saying a deal would be finalized quickly, now as it continues to drag on with nothing resolved we have to question just how close a deal is. Close is good in horseshoes but is a little tenuous when nothing happens day in and day out.

Earlier this morning the Challenger jobs report on layoffs was worse than expected. Layoff announcements rose to 53,486 in January from 41,785 in December in what is not a good signal for tomorrow's employment report. At 12,426, announcements were heaviest by far in the retail sector which the report stresses is probably not a seasonal effect as post-holiday layoffs of temporary employees are not usually announced. Remember this report is a count of announcements only. Challenger suggests that the retail layoffs reflect restructurings and/or store closures or other cost-cutting measures in the retail sector. (Bloomberg)

The remainder of the day is likely to be quiet with Jan employment out tomorrow morning. The report is expected to show non-farm jobs increased 135K overall; non-farm private jobs are seen at +170K. The unemployment rate is expected unchanged at 8.5%. The real unemployment rate is about 16.0% if those that have stopped looking are added back. Usually the report sets off a lot of volatility as it rarely matches estimates.

Fed chief Bernanke is about to testify in Congress; grilling’s frm Congress are commonplace, likely nothing will emerge that will move markets in any substantive way.