Can Bonds Hold On? Mortgage Bonds are lower so far today, trying to hold on to support. Stocks are also lower so far today.
Fed Chairman Jerome Powell will be testifying in front of the Senate Banking Committee at 10 am EST. We will be paying close attention, as his comments can move the markets and cause some “knee-jerk” reactions.
The Case-Shiller Home Price Index, which is considered the “gold standard” for appreciation, showed the biggest gain in 7 years. Nationally, there was a 10.4% annual gain in December, up from an already very strong reading of 9.5% in November. The 20-city index rose from 9.2% to 10.1% year over year, with all of the cities showing strong gains.
Phoenix, Seattle, and San Diego reported the highest annual gains among the 20 cities. Phoenix prices rose 14.4%, followed by Seattle with a 13.6% increase and San Diego with a 13.0% increase.
The FHFA (Federal Housing Finance Agency) released their House Price Index, which measures home price appreciation on single-family homes with conforming loan amounts. While you can have a million-dollar home with a conforming loan amount, the report most likely is representing lower prices homes, where supply is tightest, and demand is strongest. It should be no surprise that it is even stronger than the Case-Shiller Report – Home prices rose 1.1% in December and are up 11.4% year over year, which is even much higher than the 11.0% reading in the previous report.
Mortgage Bonds are trying to hold on to support at the 76.4% Fibonacci level of 101.041. If this level does not hold then the next level of support is about 25bp beneath current levels. If this level holds, Bonds can move higher and test the ceiling from a few days ago at 101.597.
The 10-year is also trying to hold on to the 1.373% Fibonacci ceiling, a break above here and yields can move higher to 1.601%.
We can begin the day very carefully floating.