Here we go with another (short) week. Let’s begin!
In the News
It’s first worth noting that President Biden plans to re-elect Fed Chair Jerome Powell. The importance of this is the consistency of policy. We can expect more money printing, asset (and overall) inflation, etc. The kicker is what the FED does with their bond purchasing and if they truly plan to taper.
- existing home sales
- Jobless claims
- Gross domestic income/consumer spending
- GDP revisions
- Core inflation YOY
- New home sales
- 5 year inflation expectations
We have a short week but an action packed Wednesday. The main rate-influencers are the core inflation and 5 year inflation expectation reports.
We are still in our downtrend from August. We see breather days/weeks trying to test resistance lines, but overall, the trend is down for mortgage backed securities which means uptrend for rates.
I think MBS will retest the lows again (as it has been this past week). With all of the news coming out on Wednesday, expect volatility. Last week I said, “Although I may get lucky, I’m not looking to float rates these days.” This remains true today. I always think about the bigger forces at play that influence rates, and nothing has changed, especially from an inflation point of view. The second I see these forces to ease, I will be more dovish with regards to rates.
Lastly, here is a look at the 200DMA and the 50DMA. The gap is widening. We need the gap to close with the 50DMA (black line) eventually crossing above the 200DMA (blue line) to confirm a bullish trend in MBS prices.
Please feel free to reach out with any questions with regards to rate and my thoughts on them. I’m more than happy to help out any way I can.
That’s it for now. Have a great week and Happy Thanksgiving!!