Thursday - April 3, 2014, 10:30am ET

Current Trend Direction: Sideways to lower

Float/Lock Bias: Floating this morning, locking later todayCurrent Price of FNMA 4.0% Bond: $103.69, +9bp

Mortgage Bonds are trading near unchanged headed into tomorrow's Jobs Report. As expected, Traders are not likely going to take any big bets before the numbers are released tomorrow morning at 8:30am ET.

Ahead of the report, the Labor Department reported that Weekly Initial Jobless Claims rose by 16,000 in the latest week and just above the 320K expected, representing a one-month high. The 4-week moving average, which irons out week-to-week volatility, rose by 250 to 319,500.

Outplacement firm Challenger, Gray & Christmas reported that planned job cuts in March fell by 18% from February and a whopping 30% lower from March of 2014. The first quarter total was the lowest quarterly total since Q2 of 2013 and is the lowest Q1 total since 1995. We think this is very good news and bodes well for continued improvement in the Labor market.

That leads us to the most important day of the week for economic data, the March Jobs Report.

Jobs Report Strategy

After the weak job creation numbers in December and January, which averaged 106K,February bounced back to hit 175K while the Unemployment Rate fell to 6.6%. We know that the Unemployment Rate is somewhat distorted by discouraged workers leaving the workforce and those remaining underemployed (folks working part time but wanting full time).

From all indications, lower initial jobless claims, fewer planned layoffs and a decent reading from the ADP Private Payrolls Report along with improving weather last month, it appears that Non-farm Payrolls could come in on the high side, where it is expected that employers added 195K new workers in March.

And yes, no one knows the number and it does have a chance to disappoint, but we feel that the headline risk is too great to be floating in the wind. With that said, we are recommending to float today, but switch to locking this evening near the market close and lock into the numbers tomorrow morning.

Joe Shamie NMLS # 241432

First Choice Loan Services NMLS # 210764

First Choice Bank NMLS# 177877

866-970-3400 x-5135

jshamie@fcbmtg.com