Interest Rate Roundup

Thursday, May 01, 2008

Bonds facing a critical technical test


We have an interesting technical set-up in the bond futures heading into tomorrow's April employment report. As you can see in this chart, bonds broke down below the multi-month price uptrend several days ago. They marked time after that ... then rallied today ... and then "failed" at the underside of the broken trendline.

If we get stronger-than-expected jobs data tomorrow, there's a very real chance the bonds will give up the ghost. And technically speaking, there isn't any real strong support until you get all the way down to the 110 area. We wouldn't fall that far tomorrow. But we could do so over the course of a few months. That would likely push 30-year fixed mortgage rates up into the 6.5% area. Worth watching for sure.

3 Comments:

  • BLS Birth/death model adds more jobs in April then any other month, that doesn't mean there were actually that many jobs added but a report above consensus is what I would expect. We'll see.

    http://www.bls.gov/ces/cesbdhst.htm

    By Anonymous Anonymous, at May 1, 2008 at 5:44 PM  

  • If the job report was above the consensus, Fed probably wouldn't have reduced the rate. They would have stood aside giving the indication that labor markets were doing fair.

    However, in the recent statement, they actually added the word 'further' (labor markets have softened further) as compared to March 18 statement.

    So, we could actually see a worse number in spite of the BLS model.

    By Blogger shankar, at May 1, 2008 at 8:10 PM  

  • Interesting.

    Appears you were right. But hey, maybe there is no recession if we believe BLS.

    Then why did they cut the rate?

    By Anonymous Anonymous, at May 2, 2008 at 10:08 AM  

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