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MBS Highway - Daily Updates 11/08/2022

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Current position: Carefully Floating

Stocks and Mortgage Bonds are both higher ahead of Election Day. From a nonpolitical viewpoint, and solely based on inflation and the Bond market - When either the Republicans or Democrats have the majority of control, it can make passing spending bills easier. And whether that spending is right or wrong, it is inflationary. But when there is gridlock, it can make passing those bills much tougher over the next two years, which would likely be well received by the Bond market because it means less inflation.

The October NFIB small business optimism index fell to 91.3 from 92.1. Owners continue to show a dismal view about future sales growth and business conditions and are looking to hire fewer workers. They are still citing inflation as the biggest problem.

The Manheim Used Vehicle Value Index fell 2.2% in October after dropping 2% in September. Prices are now down 10.6% year over year. The index itself is at its lowest since August 2021 and we know this line item of the goods inflation story has turned.

Auto Loan Delinquencies of 60+ days have increased to 1.5% in Q3, and while this seems low, it has been trending higher and highest in over a decade.

Mortgage Bonds are once again testing their 25 - day Moving Average. If Bonds can break above this level, there is a lot of potential room for the upside. On the other hand, if they are rejected, there is a long way down until support. Begin the day carefully floating to give Bonds a chance to break above resistance.


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