MBS Highway Daily Updates 12/30/2022
Current position: Carefully Floating
Stocks and Mortgage Bonds are both lower on the last trading day of 2022.
The Bond market was on a nice run until the Senate signed the new $1.7 trillion spending plan last week, which was just signed by President Biden last night. It does seem counterintuitive - The White House has been lamenting over inflation all year long, yet fiscal policy is working against the goal of bringing it down. This only ends up boxing in the Fed even more.
Next week's jobs data is going to be very interesting and could signal a reversal in the Bond market. We have been seeing a lot of weakness that has yet to show up in the headline numbers, but if we get a miss, Bonds are set up for a rally.
Monday: Markets closed in observation of the New Year's Holiday
Tuesday: No News
Wednesday: Mortgage Apps (last 2 weeks), Fed Minutes
Thursday: Job Cuts, ADP Employment Report, Claims
Friday: Jobs Report - Estimated 200k job creations and 3.7% UR (same as last month)
We think there is a good chance these figures miss, helping Bonds.
Mortgage Bonds continue to trade in a wide range between support at the 50 - day Moving Average and a dual overhead ceiling at the 100 - day Moving Average and 100.758 Fibonacci level. Yesterday, Bonds tested resistance but were rejected and are giving back most of those gains this morning. The 10 year Treasury is in a narrow range between support at the 50 - day Moving Average and overhead resistance at 3.90%.
In similar fashion, yields tested support yesterday and improved, but are giving back that move lower this morning and is nearing resistance. Both of the stochastic charts are looking near a crossover, which would be a good sign for Bonds and yields. Next week's jobs report could be the catalyst to spark a rally in Bonds. Begin the day carefully floating.