Update From BofA Mortgage

MMG Update - Friday, April 4, 2008 10:15am ET
Current Trend Direction: Improving Higher
Risks favor: Floating
Current Price of FNMA 5.5% Bond: $101.03, +34bp
The Jobs Report is in. This morning, the Labor Department reported a loss of 80,000 jobs in March - the biggest monthly job loss in five years. The unemployment rate also ticked significantly higher to 5.1% from 4.8% last month. Expectations were for a 5.0% reading. As a result of this lousy Jobs Report, Mortgage Bonds are trading nicely higher.
In yesterday's Daily Update and Jobs Report Strategy, we talked about how the Labor Department uses averaging to come up with a number more quickly...and how this likely understates the REAL number of jobs lost. And only until we receive later revisions do we get a true read on the Job market. And sure enough - this morning's revisions do suggest the labor market is even worse than previously reported, as huge downward revisions to both January and February erased an additional 67,000 jobs, over and above the 85,000 job losses that had been reported during that period. Overall, this dismal Jobs Report tells us the economy is indeed in a recession, and may even be worse than many think. And yesterday's very poor Initial Unemployment Claims number was not factored into today's Jobs Report because it was outside the cutoff. This tells us that the jobs picture may get worse before getting better.
Mortgage Bonds are trading in the middle of a wide range, with the next clear overhead resistance about 66bp higher than current levels. We will maintain our float position for now, but be ready to lock and preserve these gains in this volatile environment.