Yellen is Back, Market Euphoria, MBS Follow Technicals

During her confirmation hearing Treasury Secretary Janet Yellen – previous Fed Chair who is supported by all living former Treasury secretaries – told congress it’s time to go big while rates are low. The head of both our fiscal policy (treasury secretary) and our monetary policy (federal reserve) are both quick to open their wallets and we can expect to see continued purchasing of Mortgage backed securities and treasury bonds.

Rates – improved this week in reponse to technical trading patterns. Last week we noticed a ‘Bullish Morningstar’ which typically indicates a reversal and move upward. In this case this technical pattern was accurate and patience paid off with a benefit in pricing. Rates remain near historic lows and down 1% from last year.

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Jobs – the number of people filing for unemployment for the first time dropped slighlty this week but remains at an elevated level of 900K – 4.5X pre-pandemic levels. Continuing claims, pandemic unemploymment, and pandemic emergency claims all declined, most likely due to benefits expiring. It’s unclear if the new stimulus package will make this a temporary decline.

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Home Sales – are up 22% year over year while nationwide inventory is at 1.9 months, a record low. On average homes are on the market for 21 days. The median home price is up 13% due to lack of inventory at the lower price point and the fact that $1M + home sales are up 90%. year over year.

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Market Sentiment – the Citi Panic/Euphoria indx hit an all time high this week at 2.01. Anything above 0.41 is considered euphoria and can indicate a pullbck in the stock market.

Mortgage Application – volume declined by 1.9 from the previous week. Refinances are up 87% year over year and purchases are up 15%.

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