Thursday - May 1, 2014, 10:20am ET

Current Trend Direction: Sideways

Float/Lock Bias: Locking late today ahead of the Jobs Report

Current Price of FNMA 4.0% Bond: $104.84, +9 bps

Mortgage Bonds are near unchanged levels after some mixed economic data hit the wires and ahead of tomorrow's big event, the April Jobs Report.

The Labor Department reported that Weekly Initial Jobless Claims rose by 14K in the latest week to 344K, above the 315K expected and rose to the highest level since the end of February. Personal Spending surged by 0.9% in March versus the 0.6% expected and was the largest increase since August 2009. Incomes were up 0.5%, just above the 0.4% estimated. The data had little impact on trading.

The first estimate of Q1 2014 GDP growth came in at a miserable 0.1%, surprising even the most pessimistic. The good news, household spending was up 3% and boosted GDP by 2.04%, its third best contribution in four years! The bad news, inventories clipped 0.57% off GDP while exports subtracted 0.83%, due in part to the timing of the Chinese New Year. The ugly, housing subtracted 0.18% from GDP.

Jobs Report Strategy

The Bureau of Labor Statistics will report the April Jobs Report tomorrow morning at 8:30am ET where it is expected that employers added 210K jobs, while the Unemployment Rate is expected to come in at 6.6%.

From all indications, it could be a solid report given the upswing in the private sector from yesterday's ADP report. Later this afternoon, we recommend that you consider locking, especially short-term transactions closing within the next couple of weeks and the reason is two-fold.

1. If you take a look at the Bond chart for the 4% coupon in a quarter view, you can clearly see that when the price has reached the current levels, it has sold off.2. The headline risk associated with the Jobs Report is too great to chance the good pricing that has come in the past week. Better to take the gains before the report.

Again our locking stance is for short term files, which is measured in a few days to a few weeks. Be sure to tune in tomorrow morning at 8:30am ET for the numbers and impact on the markets.

Joe Shamie NMLS # 241432

First Choice Loan Services NMLS # 210764

First Choice Bank NMLS# 177877

866-970-3400 x-5135

jshamie@fcbmtg.com