Thursday, December 5, 2013

FLASH UPDATE: MBS Continue to Underperform on ADP Jobs Data

The ADP Payroll yesterday showed better than expected employment gains for November.  The monthly ADP report is always closely watched as it foreshadows the monthly Unemployment Rate to be published on the first Friday of every month – November’s unemployment numbers will be published this Friday.  The 215k jobs gained for the month by ADP overshoots the survey expectation of 170k and last month’s employment gains for ADP were revised upward by 54k jobs as well.  The strong report points to a strong employment report on Friday and modestly increases the likelihood of a Fed Taper at its December meeting.


Mortgage spreads to 7 year treasuries have now widened ~10+bps since the recent lows seen in at the start of last month.  Continuing what has been a recent theme, until and unless data or announced policy changes the trajectory of the recent  spread movement in the mortgage market, we expect spreads to continue to slowly drift wider.


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