Market Analysis

May's Non Farm Payroll report showed 49,000 jobs lost in May which was essentially right on target with expections.  However, the unemployment rate jumped from 5.0% to 5.5% which was a surprise.  So far this morning,the Treasury market is up slightly but the Fannie Mae mortgage-backed security (MBS) is flat.  Below is a snapshot taken at 8:03 am CST (1 hour into trading and 30 minutes after the release of the jobs data) from Larry Baer's Market Alert service of early morning trading which shows the Fannie Mae 5.5% mortgage backed security (MBS) flat at 0/32.  It is important to note that there is discussion on CNBC this morning that the 5.5% unemployment rate is partially related to a statistical anomoly in the way data for workers under the age of 24 was gathered which may account for 2% of the 5% increase in the unemployment rate.  I am not certain if this is correct or not, but it may partly explain why there is not a more robust response in the bond market to the data released this morning.  On the plus side, at least we can breathe a sigh of relief for now that the number was not stronger which could have been really damaging to rates.