Lots going on - commentaries below talk about the rate environment and I also included a piece from NPR that discusses the Federal Reserve meeting this last Wednesday.  It "dumbs down" the content and makes it more understandable - I can appreciate that, ha!

Have a great weekend - I look forward to talking with you soon.

Hugs,

From Think Big, Work Small

Oct job gains were substantially stronger than the overall consensus; non-farm payrolls were expected to increase by 60K, as reported jobs increased 151K. Not only Oct jobs out-stripped estimates, there were sizeable upward revisions in Sept and Aug; Sept non farm jobs was revised from -95K to -41K and August revised to -1K from -57K originally reported----a total of 110K increase from what had been reported. The unemployment rate was unchanged at 9.6%. Average hourly earnings increased 0.2% and is up 1.7% since last Oct. Private hiring, which excludes government agencies, rose 159,000 in October, the biggest gain since April. Economists projected an 80,000 gain, the survey showed. Manufacturing payrolls unexpectedly decreased by 7,000 last month. Economists had projected a gain of 5,000. Government payrolls decreased by 8,000. State and local governments reduced employment by 7,000, while the federal government trimmed 1,000 jobs.

The employment report is good news for the economy, but keep it in perspective. Over the past three months based on the Oct data and revisions in Sept and August non-farm jobs increased a total of 269K, averaging 89K a month; any increases are welcome news but employment is still not gaining much. With 80K to 100K new job entrants each month it would take job increases of 300K a month to even dent the unemployment picture.

The initial reaction sent treasuries and mortgages down in price and up in yield. The 10 yr note price plunged 27/32, mortgages started -12/32 (.37 bp). By 9:00 some stability; the 10 yr -12/21 and mortgages -5/32 (.15 bp). Not much reaction in the equity markets early on after the recent strong rallies recently. The dollar is stronger this morning on the payroll data, hindering equity advances in early activity. At 9:30 the DJIA opened -17, the 10 yr -6/32 at 2.51% +2 bp, mortgages getting hit harder, down 10?32 (.31 bp) frm yesterday's close. By 10:00 the 10 yr note back to about unchanged but mortgages still pressured.

The Fed's QE on Wednesday pushed the 10 yr note down just 10 basis points, mortgage rates down 5 basis points. Today's job report has momentarily taken the wind out of the sails on the QE easing. A lot of day left to work over the better report on jobs; a solid report but on the margin the reaction in the financial markets isn't as strong as we might have expected. Comments on CNBC calling the jobs report a very strong report, and the President applauding; although any improvement is welcome, the job market remains impaired and not even meeting the increase in population increases. The dollar rallied on the data but since is slipping, the stock indexes firmed but on the open the DJIA opened weaker and is about unchanged at 10:00, the treasury market is weaker but given recent volatility, not that bad. The hit is coming most in the mortgage market so far; lenders sitting on large long positions selling mortgages.

Nothing left today but a couple for Fedsters making speeches that won't reveal anything of substance. Next week however, adding a little more pressure on interest rates, the Nov quarterly refunding with auctions totaling $72B; less than the August refunding but auctions on 10 yr and 30 yr bonds may drag on any significant price improving until the auctions are completed. Next week's economic calendar is very skimpy with weekly claims about it.

Freddie Mac:  Low Inflation Keeps Mortgage Rates Relatively Flat This Week

Shorter Term Rates Fall Again to New Record Lows

McLean, VA - Freddie Mac (OTC: FMCC) today released the results of its Primary Mortgage Market Survey® (PMMS®), which found that the 30-year fixed-rate mortgage rate rose slightly for the third consecutive week.  The 15-year fixed-rate mortgage rate eased back down a little while the 5-year and 1-year ARMs set another low.

News Facts

•·         30-year fixed-rate mortgage (FRM) averaged 4.24 percent for the week ending November 4, 2010, up slightly from last week when it averaged 4.23 percent.  Last year at this time, the 30-year FRM averaged 4.98 percent.

•·         15-year FRM this week averaged 3.63 percent down from last week when it averaged 3.66 percent. A year ago at this time, the 15-year FRM averaged 4.40 percent.

•·         5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 3.39 percent this week, down from last week when it averaged 3.41 percent. A year ago, the 5-year ARM averaged 4.35 percent. The 5-year ARM has not been lower since Freddie Mac started tracking it in January 2005.

•·         1-year Treasury-indexed ARM averaged 3.26 percent this week down from last week when it averaged 3.30 percent. At this time last year, the 1-year ARM averaged 4.47 percent. The 1-year ARM sets another survey low this week.

Quotes

Attributed to Frank Nothaft, vice president and chief economist, Freddie Mac.

•·         "With little sign of inflation to push up long-term interest rates, fixed mortgage rates held relatively steady this week, while ARM rates hit new all-time record lows. The core price index for personal expenditures, a gauge closely followed by the Federal Reserve (Fed), rose 1.1 percent over the 12-months ending in September and represented the smallest increase since September 2001. In its November 3rd monetary policy committee statement, the Fed affirmed that measures of underlying inflation are somewhat low, relative to levels that the committee judges to be consistent, over the longer run, with its dual mandate."

From Dick Lepre, San Francisco

NPR story on Federal Reserve Meeting Nov 5^th, story issued on Wed the 3^rd, by Jacob Goldstein

The Fed's $600 Billion Statement, Translated Into Plain English

The Federal Reserve is about to create $600 billion out of thin air. It's a huge,  experimental stimulus program that will affect stock markets and government policies around the world.

But the Fed announced its plan in a statement written largely in jargon and code. So here, from Planet Money and Slate, is today's statement, translated into plain English.

The economy still sucks.People are spending a little bit more, but they're stretched thin: One in 10 workers can't find a job, wages are basically flat, home prices are way down and nobody can get a loan.Companies are buying more stuff, for now, but they're not building new factories or offices.Nobody's hiring.Nobody's building.Inflation has gone from low to super low.

The Fed has two main jobs: Keep unemployment low and prices stable.At the moment, as you may have heard, unemployment is really high. And inflation is so low that it's making us nervous.We keep saying that unemployment's going to fall. And it keeps not falling.

So to give the economy a kick in the ass-and to pump up inflation a little bit-we decided to go on a shopping spree.First of all, we're going to keep buying new stuff when our old investments pay off.Second-and this is the big news for today-we're going to create $600 billion out of thin air and use it over the next eight months to buy bonds from the federal government. We hope this will make interest rates go so low that people will borrow and spend more money, and companies will start hiring.By the way, this is an experiment, and we don't really know how it's going to work out. We reserve the right to change our plans at any time.

Of course, we'll continue our policy of letting banks borrow money for free. If you're worried this is going increase inflation and destroy the dollar, please reread everything we've said to this point. We plan to keep rates near zero for as long as it takes, but we won't tell you how long that is.In the meantime, we'll keep an eye on things.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; James Bullard; Elizabeth A. Duke; Sandra Pianalto; Eric S. Rosengren; Daniel K. Tarullo; and Kevin M. Warsh. Voting against the policy was Thomas M. Hoenig. He's the president of the Kansas City Fed, and he's voted against Fed policy at every one of our meetings this year.He thinks this whole creating-$600-billion-out-of-thin-air thing is going to do more harm than good.He also thinks that all this money we've pumped into the economy could inflate another bubble and create widespread worries about inflation. That could lead us right into another crisis.

You can click on each sentence below to see our translation line by line. Or click "convert all" to translate the entire statement.

This post was created with Plain English, a tool created by Slate's Jeremy Singer-Vine.