November unemployment rate fell to 4.2% from 4.6% on October and better than 4.5% expected. Job growth was less than forecasts; NFP jobs increased 210K with estimates at 545K, private jobs were expected +525K but increased just 235K. Average hourly earnings slipped a little to +0.3% against 0.4% expected and annually +4.8% with expectations at +5.0%. The labor participation rate increased to 61.8% from 61.6% on October. Kind of a mixed picture on jobs, the jobs report is composed of two surveys -- one of employers and the other of households. The employer survey showed hiring slowed across industries, including declines at automakers and retail outlets. The household survey showed employment surged by 1.14 million people and many came off the sidelines. Less jobs but lower unemployment and increase in the labor participation rate could help keep the Federal Reserve on track to possibly tighten policy faster than planned as inflation proves more persistent previously thought.
Prior to the 8:30 am ET report the 10 yr. note traded at 1.43%, on the initial reaction it dropped to 1.41% but rapidly bounced
back to 1.46% by 9 am. MBS prices didn’t move for 30 minutes after the report then eased.
Congress passed a short-term extension of government funding and sent the legislation to President Biden’s desk, averting a partial shutdown. The extension will go the Feb 18th when it will once again go down to the wire to extend the debt ceiling. The House voted 221 to 212 to pass it, the Senate after squabbling over Biden’s vaccine-or-test mandate eventually voted 69 to 28 to pass it. Extending current federal spending through mid-February will give lawmakers more time to negotiate and pass a new set of funding bills.
At 9:30 am the DJIA opened +124, NASDAQ +39, S&P +20. 10 yr. at 9:30 am 1.46% +1 bp. FNMA 2.5 30
yr. coupon at 9:30 am -12 bps from yesterday and -30 bps from 9:30 am yesterday.
At 10 am November ISM non-manufacturing index expected at 65.0
from 66.7 on October, the index increased to 69.1.
Urgent studies to understand how effective Covid vaccines are against omicron have begun in a global collaboration that may yield answers in a few days, a World Health Organization scientist said. Some 450 researchers around the world have begun work to isolate the highly mutated variant from patient specimens. The WHO warned on Sunday omicron could fuel surges with “severe consequences” amid signs that it makes the coronavirus more transmissible.
It took just 20 minutes after the opening in equity markets to sink, DJIA opened +124 at 10 am -111. Treasuries and MBSs will be focused on the stock indexes today, if stocks swoon it will support the bond and mortgage markets. So far this morning both markets are sowing very little movement. The last few days we’ve had large swings in MBS prices in the afternoon.
PRICES @ 10:00 AM
10 yr. note: 1.45% +1 bp
5 yr. note: 1.23% +2 bp
2 Yr. note: 0.65% +2 bp
30 yr. bond: 1.77% +2 bp
Libor Rates: 1 mo. 0.103%; 3 mo. 0.180%; 6 mo. 0.268%; 1
yr. 0.455% (12/2/21)
30 yr. FNMA 3.0: @9:30 am 103.66 -5 bp (-14 bp from 9:30 am yesterday)
30 yr. FNMA 2.5: @9:30 am 102.14 -12 b p (-30 bp from 9:30 am yesterday)
30 yr. GNMA 2.5: @9:30 am 102.92 -37 bp (-27 bp from 9:30 am yesterday)
Dollar/Yuan: $6.3753 -$0.0018
Dollar/Yen: 113.35 +0.17 yen
Dollar/Euro: $1.1295 -$0.0008
Dollar Index: 96.31 +0.16
Gold: $1771.80 +$9.10
Bitcoin: 56,295 -609
Crude Oil: $68.90 +$2.41
DJIA: 34,528 -100
NASDAQ: 15,176 -205
S&P 500: 4552 -25