Thursday - February 6, 2014, 10:30 am ET

Current Trend Direction: Sideways to lower

Float/Lock Bias: Locking into Jobs Report. Current Price of FNMA 4.0% Bond: $104.56, -9bp

Mortgage Bonds are slightly lower ahead of tomorrow's big market mover, the January Jobs Report.

In today's economic news, Weekly Initial Jobless Claims fell by 20K in the latest week to 331K and just below the 335K expected. The Claim numbers remain lofty suggesting continued pain in the labor market. Supporting that notion is today's report from global outplacement consultancy Challenger, Gray & Christmas, Inc. who reported that planned layoffs in January surged by nearly 50% from December from 31K to 45K - the increase was fueled by weak retail sales.

Productivity in the 4th quarter of 2013 rose by 3.2% with both the 3rd and 4th quarters the highest since the second half of 2009. Employers are squeezing more out of current workers and may not be in the hunt for new employees given the economic landscape - another negative for the labor market.

And this brings us to tomorrow's January Jobs Report.

Jobs Report Strategy

The Labor Department will report the January Jobs numbers tomorrow morning, which includes Non-farm Payrolls (expected 175K) and the Unemployment Rate (expected 6.5%). In December, there was a paltry 74K new jobs created. There are many reasons not to expect a good number and another one may be the weather. With that said, the bar is set pretty low for this release - meaning that anything even near expectations could weigh on Bonds.

We did switch to locking this past Tuesday night and are sticking with that plan headed into the report. Mortgage Bonds have been trading at highs last seen in November and last June. And in each instance, prices have fallen when hitting these levels. To further substantiate a locking stance, the Stochastic Chart shows that Mortgage Bonds are in an overbought state, which tells us that Bonds are ripe for a reversal lower.

At the end of the day - the report is volatile and the reaction could be volatile. Clients should lock in advance of the report, especially if they are closing within the next few weeks.

Joe Shamie NMLS # 241432

First Choice Loan Services NMLS # 210764

First Choice Bank NMLS# 177877

866-970-3400 x-5135

jshamie@fcbmtg.com