Slightly weaker this morning in the bond and mortgage markets after the 10 yr hit 3.25% yesterday, more of a psychological level than technical but still a level that may be tested before it tries breaking lower. The outlook for lower rates remains in tact, however at these levels to work lower won't be an easy ride.
ADP reported its estimate for non-farm private jobs at 8:15 this morning; 179K jobs is their estimate, forecasts were for 200K. The increase in April is the lowest estimate from ADP this year and emphasizes employment gains are far below what is needed to get the economy growing. This recession is the worst in 60 years and recovery will take much longer than in past recessions. Not much of surprise given the collapsed housing sector and increasing numbers of job losses that will be permanent. Friday the official BLS employment data, estimates are still for +183K non-farm job growth and +200K non-farm private jobs with unemployment at 8.8% unchanged from March.
At 10:00 April ISM services sector index expected unchanged at 57.3 in March; it was lower at 52.8. The weaker services sector rallied the bond market and dropped equity indexes.
Treasury announced next week's quarterly refunding; $32B of 3 yr notes, $24B of 10 yr notes, and $16B of 30 yr bonds.
Boston Fed Pres. Rosengren, in a speech this morning made the case that interest rates will likely remain low for quite awhile: "So with significant slack in labor markets, stable inflation expectations, and core inflation well below our longer run target, there is currently no reason to slow the economy down with tighter monetary policy. Until we make more progress on both elements of the Federal Reserve's mandate-employment and inflation- the current, accommodative stance of monetary policy is appropriate." Rosengren is not a voter on the FOMC, he states the case against all the recent fears coming from markets that inflation is a worrying point. One more voice in the cacophony of opinions' presently being debated.
The weekly MBA mortgage applications out early this morning. The Market Composite Index increased 4.0% on a seasonally adjusted basis from one week earlier. The Refinance Index increased 6.0% from the previous week. The seasonally adjusted Purchase Index increased 0.3% from one week earlier. The unadjusted Purchase Index was 36.9% lower than the same week one year ago. The four week moving average for the seasonally adjusted Market Index is down 0.9%. The four week moving average is down 2.4% for the seasonally adjusted Purchase Index, while this average remained unchanged for the Refinance Index. The refinance share of mortgage activity increased to 62.7% of total applications from 61.6% the previous week. This is the highest refinance share of the month. The adjustable-rate mortgage (ARM) share of activity increased to 6.7% from 6.5% of total applications from the previous week. The average contract interest rate for 30-year fixed-rate mortgages decreased for the third consecutive week to 4.76% from 4.80%, with points decreasing to 0.76 from 1.00 (including the origination fee) for 80% loans. This is the lowest 30-year fixed contract rate since December 3, 2010. The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.96% from 4.03%, with points decreasing to 0.82 from 0.96 (including the origination fee) for 80% loans. This is the lowest 15-year fixed contract rate since November 26, 2010.