Holy Hell That Was A Bad Jobs Report. But Rates Are Even Lower.

Rates are holding record lows this morning and may drop lower after another dismal BLS report showed the U.S. economy added 69k non-farm payrolls in May. This is the third straight monthly jobs flop. April was cut from 115k to 77k, and March was cut from 154k to 143k.

This non-farm payrolls figure doesn’t count actual people, it counts how many companies opened or closed, then uses that data to estimate the number of jobs gained or lost.

Unemployment rose from 8.1% to 8.2% according to a different part of the jobs report called the ‘Household Survey’ which counts people—12.7 million are unemployed and another 8.1m are working part time because they had hours cut or can’t find full time work.

RATE REACTION
Rates drop when mortgage bonds (MBS) rally, and MBS continue their stunning rally this morning that’s been driven by weak U.S. and Eurozone data and sentiment.

The 3.5% Fannie Mae coupon—a key benchmark lenders use to price consumer rates—is up another 39 basis points this morning, and if the rally holds and lenders pass this along to consumer pricing, we could see rates drop another .125% from already-record-low levels. Here’s a chart (used with permission from MBSLive).

My colleague Dick Lepre made a bold call on rates going this low and he’s proven right today.

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Reference:
BLS May Jobs Report

$TLT $MBB $ZN_F $ZB_F