Market commentary

The bond market continued its astounding sell-off yesterday with the 10-year reaching 3.33% before closing at 3.27%, 15 bps above Tuesday’s close and 35 bps above Monday’s close. This type of sell-off is not unprecedented in the bond market. The past two days of trading are only the 10th worst two days for the 10-year Treasury since 2000. It is, however, unexpected and borrowers and loan officers who were floating are not happy. Although in reality, while one may not be able to lock at 4% for 30 years, 4.625% or 4.75% for a 30 year fixed are interest rates that have not been seen for nearly 5 decades. I think folks need to see this as the glass is more than half-full as apposed to bemoaning that 4% is no longer available.

The bond market is opening up slightly better this morning in what, so far, looks like a dead cat bounce rather than genuine strength in bonds. The 10-year is up almost half-a-point and its yield is down to 3.22%.
Initial jobless claims dropped 17,000 last week from 438,000 (revised up from 436,000) to 421,000 (versus estimates of 425,000). The jobless claim data have repeatedly confirmed that layoffs have slowed with the 4-week average dropping from 488,000 in August to 427,000 now. The problem facing the labor market now is that while people are not losing as many jobs, the unemployed are still not finding new jobs.

The last item to note is the U.S. Treasury will auction $23 billion of 30 year bonds today. With the recent increase in interest rates the belief is there will be decent demand for this debt. Stay alert, the auction results will be know at approximatley 1:00 P.M., ET.