Current position: Carefully Floating
Bonds went through their monthly coupon rollover last night. This occurs each month because mortgage bonds are finite. They have an end term, such as 30 years. Therefore, each month, a new 30-year period begins. This new 30-day extension is reflected in an adjusted rollover price. This rollover does not impact your pricing. The effect of yesterday's rollover was -8 bp.
Make sure to take the MBS Highway Housing Survey to help us get a real-time read on your local housing market, and feel free to share with referral partners: https://www.surveymonkey.com/r/TXKMHKH.
Stocks and mortgage bonds are both lower to start the day. Pressuring the bond market is news out of the Bank of Japan. With Kuroda leaving, there has been speculation on who his successor would be. The leading candidate was Deputy Governor Amamiya, who was expected to continue Kuroda's dovish stance. However, it appears he denied the job, and the next Bank of Japan Chief will be Kazuo Ueda, but he is more hawkish, and it is anticipated that he may make some changes to Japan's yield curve control. As a result, global yields are moving higher, including here in the US.
Yesterday's 30-year auction also did not help bonds and was met with very weak demand, which caused a selloff in the bond market.
Zillow and Pulsenomics' Home Price Expectations Survey
The Q4 Home Price Expectations survey, which was done in Q4 of 2022 and asked 150 of the top economists in the US where they thought home prices would be in the future, showed that the average expected appreciation over the next 5 years is 23%. While most people's time horizon is more like 10, 11, or 12 years, the opportunity over the next 5 years alone is significant.
If someone were to buy a $500,000 home and we saw 23% appreciation over the next 5 years, they would gain $115,000 in appreciation. Make sure to explain the opportunity, even in the face of all of the negativity from the media.
Week Ahead
The main focus of next week will be Tuesday's Consumer Price Index report for January.
Tuesday: Consumer Price Index, NFIB Small Business Optimism Index
Wednesday: Mortgage Apps, Retail Sales, NAHB Housing Market Index
Thursday: Producer Price Index, Housing Starts, Initial Jobless Claims
Technical Analysis
Mortgage bonds have broken down beneath the 100.758 Fibonacci level but are now trading just above support at the 100-day moving average, which should provide ample support. After locking yesterday, and with potentially Bond-friendly news next Tuesday, we can begin the day carefully floating.