Market commentary

Bond prices are falling this morning---yields rising, on a stronger than expected job report from ADP. The ADP employment report for June is projecting private payroll growth of 157,000, a substantial increase to May’s report and is well above the expectation for an increase of 70,000. Keep in mind it will take the creation of 250,000+ new jobs per month to begin to make a dent in the U.S. unemployment rolls.

Initial jobless claims for the week ending July 2 came in at 418,000, above 400,000 for the 13th consecutive week.

The European Central Bank raised its keys interest rate by 0.25% to 1.50%. There is a real contrast of approaches occurring right now between the European and American responses to very similar situations. In Europe, they are implementing fiscal austerity, a euphemism for raising taxes and cutting spending, and are again tightening monetary policy despite excessively high unemployment rates. In the U.S., politicians have yet to implement any austerity and monetary policy is remaining accommodative for an “extended period.” Remember, the U.S. government has been operating without a budget for 800 days, as Congress could only agree on passing continuing resolutions prior to the November 2010 elections.

In reaction to today’s news and data the yield on the 10 year note has risen to 3.16%, after closing at 3.11% Wednesday. Mortgage bonds sold off into the close on Wednesday and are weaker again this morning. Pricing is worse by .375% to .50%.