Why bonds tanked on a stronger-than-expected jobs report

Market Realist

Realist Real Estate Roundup, November 4–8 (Part 1 of 7)

Why follow the weekly Realist Real Estate Roundup?

The roundup is a weekly series in which we discuss the week’s trading in government bonds and TBA (To-Be-Announced) mortgage-backed securities. We’ll see where mortgage rates have been and we’ll go over the weekly economic data and earnings announcements. Then we’ll look forward to what’s coming up the following week. The information in this series will be relevant to mortgage REITs like American Capital Agency (AGNC), Annaly (NLY), Hatteras (HTS), Capstead (CMO), and MFA Financial (MFA) as well as people who invest in homebuilders.

Bonds sell off on a stronger-than-expected jobs report

The week started off with a stronger-than-expected ISM services report, but there wasn’t much in the way of market-moving economic data until late in the week, with the all-important jobs report. On Friday, the employment situation report revealed that the government shutdown did not have the negative impact on jobs that everyone had feared. Payrolls increased by 204,000, which was well in excess of the 120,000 Street estimate. The report caused a sharp sell-off in the bond market, with the ten-year yield increasing almost 15 basis points to 2.75%.

On the equity side of things, we had a slew of earnings reports out of the mortgage REITs, but the successful Twitter IPO stole the show. The stock priced at $26 a share and traded as high as $50 intraday.

In the next parts of this series, we’ll look at trading in the TBA market (which is the basis for mortgage rates), see where mortgage rates have been for the week, and then discuss past and upcoming economic data.

Continue to Part 2

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