Weekly Realist Real Estate Roundup, October 21–25

Must-know: The bond market rallied on a lousy jobs report

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.

10 year bond yield - LTEnlarge Graph

Bonds continue their post-shutdown rally

The rally in the bond market continued last week, as we got the long-awaited September jobs report. The unemployment rate dropped, but only 148,000 jobs were created, which was below consensus estimates. The labor force participation rate remained low at 63.2%. These numbers predate the government shutdown, so expect the October report to be even worse.

The consensus seems to be that we won’t get a change in policy this year, and March 2014 seems to be when we’ll begin tapering. Bonds rallied 7 basis points and closed the week at 2.51%.

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.

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