Novmeber : 30-Yr Fixed National Average Rate Chart

What happened yesterday?

Mortgage backed securities (MBS) lost -18 basis points (BPS) from Wednesday's close which caused 30 year fixed rates to move slightly higher.  So far this week(and month) MBS have lost -107 BPS. 

We started the trading session with news that the European Central Bank left their key interest rate unchanged.  This was widely expected and bonds had little reaction to it. 

Another day....another better than expected employment related report as Initial Weekly Jobless Claims came in below 300K and was much lower than market expectations (298K vs 323K).  Continuing Jobless Claims were also lower than expected.  Remember, ANY positive data about the labor force is negative for MBS for two reasons:  First, it is positive economic news...and economic growth leads to inflation and that is always negative for long term bonds. Secondly, the more growth in the job sector, the sooner the Fed will taper and decrease the amount of their monthly bond purchases.

The second revision to the third quarter GDP was red-hot. It was revised upward from 2.8% to 3.6%.  The bond market largely shrugged this data off as it is older data so the markets are not as impacted by it but it was a very strong reading.  The upgrade was primarily due to an increase in inventory build up.

Factory Orders were a smidge better than expected (-0.9 vs est of -1.0), bonds were not impacted by this report.

The sell off after the Initial Jobless Claims were report was slowed down due to remarks by the ECB President, Draghi during his press conference where he made it clear that the ECB would not be lowering their key interest rate any further.