Stocks are mixed and Mortgage Bonds are higher, erasing yesterday’s losses and trading above where they opened ahead of the “stronger” BLS Jobs Report. Clearly, the market is calling BS on the BLS, as their figures do not make any sense.
Yesterday’s 10-year auction was weak, with our own Bill Hagmann grading the auction a D+, likely due to the stronger than expected Jobs Report…at least on the surface. But the Bond market is rallying this morning, so today’s 1:00pm ET 30-year Bond Auction may be a bit stronger.
As we went over, yesterday the BLS said that 130,000 jobs were created in January, after job growth was essentially flat in 2025 for the full year. They revised their figures down by 69% to the weakest year of job growth since the Great Recession.
The raw jobs data showed that there were 2.65M jobs lost in the headline Business Survey and 630,000 lost in the Household Survey…where we get the unemployment rate from. There are always seasonal adjustments higher in January, as the report tries to account for seasonal hires being let go, but this was extremely generous.
We have explained many times that all of the job growth has been coming from Education/Healthcare, which are jobs that are always needed and not impacted by what’s happening economically. For 2025, if you remove those jobs, all of the other sectors combined had 517,000 job losses. And let’s remember, there are still more QCEW revisions to come for 2025.
Bottom line – Pretty much every analyst and the Bond market does not believe yesterday’s Jobs Report, which is why Bonds are now higher and yields are lower than they were at the open yesterday.
Existing Home Sales
Existing Home Sales were released this morning, showing closings on existing homes in January. The market was expecting a 4% decline, but sales fell 8.4%. The annualized pace is now at 3.91M.
This was a miss. However, Realtors did say that the bad weather in January did impact things, and while that may be true in the Northeast especially, a lot of the decline came from the West.
Something else to consider: The annualized figure takes the sales in the month and annualizes them, so it can be very volatile. December saw very strong sales, so the annualized pace was the highest in 3 years…but maybe some of the sales were pulled forward, resulting in a weak January, along with the weather. We feel these figures will improve, especially as we get into the spring homebuying season.
Existing inventory continues to fall, dropping 0.8% to 1.22M units, which is tight. Inventory was up only 3.4% year over year and based on the pace of sales, the months’ supply of inventory is only 3.7 months, below a balanced market of 4.6.
The median home price fell 2% MoM to $396,800. Median prices are now up 0.9% year over year…but remember this is not appreciation and is measuring the middle-priced home that sold in January.
The NAR did release the Realtor Confidence Index within this report, showing that homes remained on the market for 46 days, compared to 41 days last year. 16% of homes sold above the list, which was unchanged year-over-year.
First-time homebuyers accounted for 31% of sales, increasing from 29% in the previous report and 28% last year. They continue to stay in their range between 27% and 32%, but affordability being at the best level in about 4 years may be helping.
Cash buyers made up 27% of transactions, up from 29% last year, while investors accounted for 16% compared to 17% last year.
Initial Jobless Claims
Initial Jobless Claims, which measures individuals filing for unemployment benefits for the first time, fell 5,000 to 227,000, which was slightly higher than estimates. As stated many times previously, this figure does not capture the people going into the gig economy, hence understating what’s really happening.
Continuing claims, or those who continue to receive benefits after their initial claim, rose 21,000 to 1.86M. This too was a little higher than market estimates. The figure is still below 1.9M, but there are a lot of benefits expiring, as people can only stay on them for 26 weeks in many states, 21 weeks in several, and 16 weeks or less in seven states.
NY Fed Consumer Credit
The NY Fed released their Consumer Credit report, showing that credit levels are rising dramatically, but so are 90+ day delinquencies. Auto Loans and Credit Cards that are 90+ days delinquent are at the highest levels since the Great Financial Crisis, showing that consumers are adding on more debt but having a hard time paying it. Once one gets to 90+ days it's hard to catch up, as they have four payments to pay back.
Rate cuts would certainly help mitigate some of the interest burden, but the question remains how long can consumers continue to spend on credit before they hit a wall? Retail Sales in January were weak, but one report does not make a trend. We will be paying close attention to consumer spending behavior, as it could be a sign of a downturn.
Technical Analysis
Mortgage Bonds are showing a lot of strength this morning, breaking back above the 25-day Moving Average. If Bonds can get above the highs from the previous week, the next stop is 101.38, roughly 25bp above present levels.
The 10-year is down 4bp to 4.13%, almost at yesterday’s lows before the Jobs Report. Yields are just above the 100-day and 4.126% Fibonacci level.
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