MBS Highway Daily Updates 11/21/2022
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Current position: Floating
Stocks are lower and Mortgage Bonds are trading near unchanged levels so far this morning.
Atlanta Fed President, Raphael Bostic, spoke over the weekend and said that he is no longer in favor of large rate hikes. He also said if the economy progresses like he thinks it will, he believes the Fed has 75 to 100bp of hikes left. This would translate to the well-telegraphed 50bp hike on December 14 and then 25 or 50bp on Feb 1. He also warned that the Fed needs to resist reversing course, even if the unemployment rate rises uncomfortably until it is clear that inflation is well on track to return to their longer-run inflation target of 2%.
The week ahead
It's a holiday-shortened week, with the markets closed on Thursday in observation of the Thanksgiving Holiday. Additionally, Friday will be shortened Bond market session closing at 2:00 pm ET. As a result, there is a smorgasbord of news packed into Wednesday.
Tuesday: 7 - year Auction
Wednesday: Mortgage Apps, Durable Goods, Initial Jobless Claims, New Home Sales, Fed Minutes from the Nov 2 Fed Meeting
Thursday: Markets and our office closed
Friday: No News, 2pm Bond market close
Technical analysis - 50 - day is our friend
The 10 - year Treasury Note Yield has been testing the 50 - day Moving Average the last few sessions, which has held and kept a lid on yields. The 50 - day Moving Average is our friend and so long as we can remain beneath it, will be negative price action in Mortgage Bonds. If the 10 - year can catch a bid, there is a move to lower until reaching the lows from Nov 16 at 3.67%.
Mortgage Bonds have battled with resistance at 100.534 for the last week, and it has proved to be a difficult ceiling, rejecting Bonds each time. Bonds have a pretty strong support level beneath current prices at the 50 - day Moving Average, should prices deteriorate. With the 10 - year remaining beneath its 50 days, we can begin the week floating.