(Reuters) - Goldman Sachs, along with several other large financial institutions, on Wednesday cut their estimates for non-farm payrolls growth in May after ADP Employer Services reported much lower-than-expected growth in private payrolls last month. Goldman cut its estimate and said employers added 100,000 jobs in May, down from an original estimate of 150,000 added jobs. The consensus estimate was also cut by the economists surveyed by Reuters: RTRS- ECONOMISTS LOWER FORECAST FOR U.S. NONFARM PAYROLLS INCREASE TO 150,000 IN MAY FROM 180,000 PRE-ADP. The government will release May non-farm payrolls and unemployment data on Friday morning. (Reporting by Chris Reese; Editing by Dan Grebler)

Trading activity in both benchmark Treasuries and production MBS coupons has tapered off as we creep closer to market close. Day trader profit taking has been the main motivation in the afternoon session. The resulting impact on price levels has however been minimal as a steady bid remains in place from interested buyers and dealers. Booking short-term gains is not an unexpected event and shouldn't viewed as an indication of a bearish bias in the bond market. It is actually quite healthy to see profits being taken at rally extremes. The underlying tone of a weaker economic outlook (we've called it a "false start") remains in place which supports the recent "flight to safety" into government guaranteed TSYs and higher-yielding MBS coupons. Focusing in a bit more on the expected impact on the loan pricing, there has been minimal activity in the secondary market today that would imply lock desks are shifting their hedging strategies to MBS coupons that which would allow for a faster decline in mortgage rates (4.0 30yr MBS). Once we see secondary moving "down in coupon" with their hedges, we will be quick to alert rate-watchers of the pending transfer of the "Production Coupon Title Belt" to 30yr 4.0 MBS.. This event is more likely to occur on Friday morning after the Employment Situation Report. Beyond the technicalities of rate sheets, loan pricing is extremely aggressive. C30 Best Execution has fallen to 4.50%. Maybe the reason we're not seeing more loan supply is because refinance demand just isn't what it used to be. READ MORE: http://www.mortgagenewsdaily.com/06012011_mba_applications.asp

(Reuters) - High U.S. unemployment is not a "quickly resolvable problem" but April's job gains show the economic recovery is on a firmer footing, a top Federal Reserve policymaker said on Wednesday. "We've got a long way to go before labor markets can be described as healthy again," Cleveland Federal Reserve Bank President Sandra Pianalto told the Columbus Metropolitan Club. "Recent gains in the labor market suggest that the economy is on (a) firmer footing and that the recovery is likely to continue. However, growth may be frustratingly slow at times," she said. At its last policy-setting meeting, the Fed signaled its $600 billion bond buying program would end as planned in June, while also stressing it was in no rush to raise interest rates. The Fed has kept interest rates at record lows near zero since December 2008. Pianalto said she expects inflation to fall back below 2 percent in the next couple of years and that it could take about five years for the jobless rate to reach its long-run sustainable rate of 5.5 to 6 percent. Given that backdrop, she said, current monetary policy is appropriate. Pianalto's views tend to hew closely to those of Chairman Ben Bernanke and the center of the Fed's policy-setting committee. (Reporting by Kristina Cooke, Editing by Chizu Nomiyama)

Multiple reprices for the better have been awarded by lenders as "rate sheet influential" MBS prices continue to set new 2011 price highs. C30 Best Execution is now 4.50% as the Fannie Mae 30yr 4.0 MBS coupon has crossed deep into the 101 price handle thanks to further gains in Treasuries, which have now drifted down to 2.95%. Meantime, related markets are tanking. The S&P just made a leap lower and is currently down 1.53% on the day thanks to a 1.35% decline in oil prices. The stock lever is clearly adding momentum to this rates rally.

C30 loan pricing is 30.7bps better on average this morning with the largest rebate improvements seen in note rates below 4.625%. Although some lenders may be withholding overage to manage fallout and reduce hedging costs, Best Execution looks to have improved to 4.50% after "rate sheet influential" MBS coupons set new 2011 price highs today. We'd expect loan pricing to continue improving on Friday if the official jobs report disappoints the market. This would provide confirmation that "The Wall", which has prevented mortgage rates from making larger strides lower, has indeed been toppled.