MBS and 10-Year Try to Hold the Line. There will be a Bond Coupon Rollover after the close of the market today. This occurs each month because Mortgage Bonds are finite. They have an end term, such as 30 years. Therefore, each month a new 30-year period begins. This new 30-day extension is reflected in an adjusted rollover price. This rollover does not impact your pricing, but can skew the chart.
Stocks are lower and Mortgage Bonds are slightly higher to start the day. Mortgage Backed Securities (MBS) and the 10-year are holding the line – Mortgage Bonds have bounced higher off their 200-day Moving Average, and have climbed back above the 103.053 Fibonacci level. Bonds now have a triple ceiling above them at the 100, 25, and 50-day Moving Average, which will be tough sledding. The 10-year hit on 1.19%, just as we thought it would, and have moved lower to 1.15%.
Tomorrow’s 10-year Auction at 1:00pm EST will be extremely important. If there is strong demand and foreign participation, yields and MBS will likely continue to improve.
In economic news, the NFIB Small Business Optimism Index dropped 0.9 points in December to 95.0, which is a 9-month low. It is now at the lowest level since May, right in the heat of the pandemic. It is interesting to see those in the media saying how strong the economy is, yet optimism is quite low.
CoreLogic reported their Loan Performance Insights for the month of November, showing that 5.9% of mortgages were 30-days or more delinquent. This is down from 6.1 last month. Loans 60-89 days past due remained stable at 0.6%. Loans that are seriously delinquent or 90 days or more decreased from 4.1% to 3.9%. Homes in foreclosure remained stable and very low at 0.3%.
We are seeing improvements across all areas of delinquencies. One foreclosure is too many, but when you factor in homes that are owned free and clear and take a look at all homes, only about 1 in 500 homes has a foreclosure…which is pretty good.
Continue carefully floating with MBS and the 10-year holding the line.