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MBS Highway Daily Updates 02/06/2023

Current position: Carefully Floating

Make sure to take the MBS Highway Housing Survey to get a real-time read on the housing market, and feel free to share with referral partners:

Stocks and Mortgage Bonds are both lower to start the week after tough central bank talk from the Bank of England and European Central Bank.

Both the ECB and BOE said that the risk of overtightening is dwarfed by the risk of doing too little. They also said that monetary policy needed to continue to show teeth until inflation moved lower than their target.

These comments come on the heels of the "much stronger" than expected BLS Jobs Report from the US. And this is important, as the US is the engine of the global economy. But their commentary is based on misunderstanding the US data, as we started to go over on Friday.

More on the Jobs Report

On Friday, we discussed how the BLS Jobs report showed 517,000 job creations in January, blowing out estimates, but there were large seasonal adjustments, population controls, and new benchmarks.

When removing the population controls, the household survey would not have shown 894,000 job creations, but rather would have only shown 84,000. Additionally, the unemployment rate would not have improved from 3.5% to 3.4%.

But there's more: Our good friend David Rosenberg reported that the raw, non-seasonally adjusted data actually showed 2.5M job losses, but after seasonal adjustments, it was revised to a positive 517,000. The last few years, January has been unexplainably strong. It has managed to be 6x stronger than the average for all the months over the past three years. The biggest anomaly, perhaps, was that a 471k plunge in the retail sector translated into a +30k seasonally adjusted run-up, the best number since August, even though retail sales have slid in three of the past four months.

The BLS report was also in stark contrast to other data we are seeing—ADP had only 106,000 job creations in January, the weakest in 2 years, while BLS had the strongest in the last 6 months.

Additionally, the ISM Services report showed businesses were "unable to hire qualified labor because supply is thin" and "continue to let people go, not replacing any open positions."

S&P Global's US services PMI said, "Hiring has almost ground to a halt as firms reassess their payroll needs in light of the weaker demand environment."

We hope that the markets are able to digest some of this data and see through some of these anomalies.

Week Ahead

Tuesday: Powell Speech

Wednesday: Mortgage Apps, 10-year Auction

Thursday: Initial Jobless Claims, 30-year Auction

Technical Analysis

With the latest decline, Mortgage Bonds have broken beneath their 25- and 50-day Moving Averages, which will now act as resistance. They have found support at the 50% Fibonacci level of 100.758 and have bounced higher from it. After locking Thursday and avoiding the downturn, we can begin the week carefully floating with support holding for now.


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