MBS MID-DAY: Bond Markets Rally After Weak Jobs Report

MBS Pricing Snapshot

Whatever chances existed that we'd see a reduction Fed asset purchases in 2013 are probably out the window after this morning's payrolls print. The data was at least sobering on several fronts, if not downright disheartening for econo-bulls. 2 out of the last 3 private payroll readings have been the lowest of the past 12 month period, and today's reading is lower than any reading in 2011.

Clearly, this isn't an economy that's ready to have the punch-bowl removed, even without the fiscal drag. Given the looming budged battle in Q1 of 2014, it makes the conclusion that much easier.

Bonds and stocks both agree (more QE = higher prices for both). Fannie 3.5s are up 21 ticks so far at 102-17 and 10yr yields are down 8bps at 2.53. S&P's have added just over 10 points on the day (which is more meaningful considering they were already pushing all-time highs).

Construction Spending just came in stronger than expected, but there's been no reaction. The lousy NFP numbers are dominating the day. That said, momentum in tradeflows looks to be leveling off near current levels regardless of inbound data.

- Sept NFP +148 vs +180k forecast
- Aug revised to 193 from 169k, July to 89 from 104k
- Unemployment rate 7.2 vs 7.3 forecast
- Participation Rate unchanged
- Private Payrolls 126k vs 180k forecast
- Average Workweek unchanged at 34.5
- Market Reaction: Strong rally in bond market

Total nonfarm payroll employment rose by 148,000 in September the U.S. Bureau of Labor Statistics reported today. Employment increased in construction, wholesale trade, and transportation and warehousing.

The unemployment rate, at 7.2 percent, changed little in September but has declined by 0.4 percentage point since June. The number of unemployed persons, at 11.3 million, was also little changed over the month; however, unemployment has decreased by 522,000 since June.

Among the major worker groups, the unemployment rates for adult men (7.1 percent), adult women (6.2 percent), teenagers (21.4 percent), whites (6.3 percent), blacks (12.9 percent), and Hispanics (9.0 percent) showed little or no change in September. The jobless rate for Asians was 5.3 percent (not seasonally adjusted), little changed from a year earlier.

In September, the number of long-term unemployed (those jobless for 27 weeks or more) was little changed at 4.1 million. These individuals accounted for 36.9 percent of the unemployed. The number of long-term unemployed has declined by 725,000 over the past year.

Both the civilian labor force participation rate, at 63.2 percent, and the employment- population ratio at 58.6 percent, were unchanged in September. Over the year, the labor force participation rate has declined by 0.4 percentage point, while the employment- population ratio has changed little.

The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) was unchanged at 7.9 million in September. These individuals were working part time because their hours had been cut back or because they were unable to find a full-time job.