March 1st, 2023 - Market Update
Current position: Carefully floating
Stocks and Mortgage Bonds are both lower to start the day, with Mortgage Bonds continuing to test and remain above the base of support formed the last seven trading sessions.
We are seeing many of the COVID-19-era policies coming to an end, and a very important one is about to expire tomorrow. The expansion of the food stamp program, which will negatively impact 32 million Americans at a time when food prices are still going up, will be coming to an end.
The current monthly assistance of $251 per recipient this past year is about to shrink by one-third or $82. That means that roughly one tenth of the population will have less money for food, and as a result, will likely have less discretionary income to spend on other things. This will likely cause a further slowdown in the economy and slowdown in inflation.
At the same time, the Biden administration's plan to forgive student loans (held by 40 million people) is facing a very a skeptical Supreme Court. If this doesn't go through, a lot more individuals will have hefty student loan payments, and have less discretionary income as well.
Mortgage Apps
The MBA released their Mortgage Application data for last week, showing that purchases fell 5.6% last week and are now down 44% year over year.
Interest rates increased from 6.625% to 6.75%, which is 2.625% higher than this time last year when rates were closer to 4.125%. Refinances fell 5.5% last week and are down 74% from this time last year.
Technical Analysis
Mortgage Bonds are continuing to trade somewhat sideways for the last 7 days, forming a base of support around 99.547. So long as we remain above this level, we can be patient, ahead of what we expect to be Bond-friendly news on March 10th and 14th. But if this level is broken, there is more room to the downside
A little later this morning the ISM Manufacturing Index will be reported, and if it's weak, could provide some upside movement in Bonds. Begin the day carefully floating.
Source: MBS Highway
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