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MBS Highway - Daily Updates 10/18/2022

Current position: Floating


Stocks and Mortgage Bonds are both higher to start the day. The Bond market volatility has been crazy - You may be familiar with the VIX index, which measures Stock market volatility. There is also a MOVE index, which measures Bond market volatility. It had skyrocketed to the highest levels we have seen since March of 2020 when we had a pandemic and the Fed stepped in to try to help and did massive amounts of purchasing. Unlike 2020, this move higher in volatility was not short-lived and has been consistently higher. Bitcoin is known to be one of, if not the most volatile assets. And when comparing the Bond market volatility to Bitcoin's volatility, the Bond market is 7 times more volatile in recent months!



The Fannie Mae Home Price Index was released yesterday, showing that home prices rose 0.2% in Q3 from Q2 and are up 13.2% year over year, which is down from 19% in the previous quarter on an annual basis. While prices were relatively flat quarter to quarter and only up slightly, they are hanging in there despite higher rates.


Zumper released their National Rent Report for September, showing that for the ninth time in as many months, national one-bedroom rent has reached a new high of $1,503. Two-bedroom national median rent, now $1,845, is also at an all-time high. Both one and two bedrooms are up roughly 11% year over year.


Mortgage Bonds are trading in a wide range, but are finding support at the lows from October 14 at 98.266. There is room to move higher until reaching the next ceiling at 99.54. Additionally, there are the makings of a positive stochastic crossover, which if confirmed, point to higher prices based on momentum.


The 10 - year is trading at 3.98%, with a ceiling of 4.075% and a floor of 3.96%. If yields can get under 3.96%, there is a lot of room for the downside until reaching 3.71%. Overall, the technical picture is looking positive, at least for now. Begin the day Floating.