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MBS Highway Daily Updates 04/26/2023

Current position: Carefully Floating

Stocks are higher and mortgage bonds are lower to start the day, following a stronger than expected durable goods report.

Mortgage Applications

The MBA released their mortgage application data for last week, showing that purchases increased by 4.6% last week after falling 10% in the previous week. They have now been higher six out of the last eight weeks. Purchases are still down 28% from this time last year.

There was a rise in interest rates, which increased from 6.43% to 6.55%. Rates are about 1.125% higher than this time last year, when rates were 5.375%. Refinances increased 2% last week and are now down 51% year over year.

Durable Goods

Durable goods orders in March were up 3.2%, which was better than the 0.7% gain expected. And this comes after a negative revision to the previous month, making this number look better than it would have been without the downward revision.

These are bigger, less frequent purchases you often have to finance (big ticket items). And we're seeing most of these gains coming from aircraft orders.

Technical Analysis

Mortgage bonds tested the all-important ceiling at their 200-day moving average but were rejected lower. They are currently trading in an incredibly narrow range between a dual floor comprised of the 100-day moving average and 100.758 Fibonacci level and a ceiling at the 25-day moving average.

The 10-year has broken beneath the floor at the 3.43% Fibonacci level. If yields can stay below this level, the next stop is 3.27%. Begin the day carefully floating.


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