August 24th, 2022 - Market Update
Current position: Carefully Floating
Stocks are higher and Mortgage Bonds are lower to start the day.
Tomorrow kicks off the Jackson Hole Economic Symposium, which means that today Fed Chair Jerome Powell is heading to Jackson.
The meeting is comprised of prominent central bankers, finance ministers, academics, and financial market participants from around the world who will be meeting to discuss economic and financial issues including, inflation.
Traditionally Fed chairs have used the Jackson Hole Symposium to provide an update on economic conditions and also give an indication of any policy shifts that may be expected. Since we are now in a downturn and talk of a looming recession, this year's symposium will be of great importance.
Pending Home Sales, which measures signed contracts on existing homes, fell 1% in July, which is better than the 3% drop expected. Year over year, sales are now down 20% ear over year.
As expected, activity continues to slow, but the Chief Economist from the NAR, Lawrence Yun, believes that we are at or close to the bottom in contract signings. He went on to say that home prices are still rising by double digits year over year, but annual gains should moderate to 5% by year end and into 2023. He also said that home sales should start to rise by early next year.
The MBA released their Mortgage Application data for last week, showing that Purchases fell by 1% last week and are down 21% year over year. Interest rates moved higher from 5.45% to 5.65% and are 2 5/8% higher than this time last year.
Refinances decreased by 3% last week and are down 83% year over year. Refinances continued to make up 31% of all transactions.
Mortgage Bonds continue to move lower in their range between support at 99.28 and overhead resistance at the 50-day Moving Average.
There is still over 40bp of room to the downside before reaching the aforementioned floor of support, so we have to continue to remain on guard.
The 10-year has convincingly broken above the 3% psychological level and is now at an intermediate level of resistance at 3.10%, which is holding for now. If this level is broken, the next ceiling is all the way up at 3.25%.
After locking the previous two days, most of your pipeline should be protected. With the ceiling on the 10-year holding for now, we can begin the day very carefully floating.
Source: MBS Highway
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