Rough Open for UMBS.   Down 36 bps in the first hour of trading. Stock futures flat.

The jobs report was much stronger than expected.

Nonfarm Payrolls = 272k vs 180k f’cast,      [175k prev]

Unemployment Rate = 4.0 vs 3.9 f’cast,      [3.9 prev]

Wages = 0.4 vs 0.3 f’cast,                   [ 0.2 prev]

Wages YoY = up 4.1% vs 3.9% est

Needless to say, 272k vs 180k is not in line with recent hopes for a cooldown in the labor market.  Bonds had been positioning for a soft report and are unsurprisingly a bit surprised… in a bad way.

The number of new jobs created came in at 272,000, much higher than the 180,000 that was being estimated ahead of time. This component comes from the establishment survey – the survey of businesses basically. However, the unemployment number came in higher as well at 4.0 versus the 3.9% expected (and the 3.9% from last month). So how can there be more jobs created, but unemployment goes UP? Because the unemployment number comes from the household survey – a survey of the people. But what is really sus (that’s the cool way to say “suspect” these days) is that these two surveys are showing very different data. That supports the growing idea out there that this data is being manipulated or down right fabricated. Me? I would wonder why if you are going to lie about one piece, why not lie about both?

For-sale inventory increased 35% last week, according to Realtor.com. We are seeing an increase in affordable inventory as well. Inventory remains between 20% and 60% below pre-pandemic levels, depending on the region. We still have a ways to go in order to get the housing market into balance, however we are moving in the right direction.

Bonds made it almost all week putting on a superhuman display of immunity to bad news, but Friday’s jobs report was the kryptonite.  Whether or not a trader has any criticism for volatility in the payrolls data, they still agreed on the move with 10yr yields up nearly 15bps by the close.  MBS outperformed nicely, as we were hoping they would, thus limiting the worst possible rate sheet outcomes.  In fact, we’re ending the week in better shape than the last and thoughts have already turned toward next week’s bigger ticket events (CPI and the Fed on Wed).  And yes, this is a “dots” meeting for the Fed…

UMBS closed the day down 43 bps at 100.27