The much-anticipated jobs report was released this morning.  Estimates called for anywhere for anywhere from 65,000 - 90,000 new jobs to be added.  The report slightly exceeded expectations coming in at 96,000.  However, this was a downward movement from the previous month.

In addition, consumer sentiment, expected at 75.0, came in at 74.5, which was a decrease from the previous month.  This provides some support for bonds as week consumer spending hurts the stock market, forcing investors to buy bonds.

Despite the relatively moderate data and the moderate reaction by the Dow, the bond market has reacted wildly compounded by losses yesterday afternoon. The 5.5% FNMA 30 yr bond is down a crushing 24/32nds over yesterday. and the 6.0% note is down an appreciable 8/32nds.  This has combined to add more than .5% of a discount point to the cost of loans this morning, meaning rates are up by .25-.375%.

A possible reason for the huge swing is that many bond traders were expected the FED to cut rates by 50 bps when they next meet.  This mornings data makes that less likely (less than 50% chance).  Since the 50bps cut may have been "priced in" to the market to some extent, the violence in bonds could also be a revision to only price in a 25bps cut.



If you you believe that the market will continue to rally, then lock.  The mortgage bond prices have been trending upward on a sawblade pattern.  Today is a low point in the sawblade's upward trend.  I think bonds will rebound next week and will be waiting to lock until then.  The safe play, short term is to lock.  Long term: float.  My outlook on the market in general is bearish and I think rates will gradually continue their downward trend.