Good Monday AM,

The market continues to show weakness as we count down to Wednesday’s FED meeting.

Markets are pricing in a 100% of a rate hike of at least .75%. The Builder survey was released today and is now in contraction mode. The ten-year is breaking above the key resistance level of 3.47. It is possible that it fails and pulls back, but for now, it sure wants to break. A break above that level could easily lead us up to 3.63% (rut row), a level we have not seen since 2010!

Mortgage Bonds opened very weak and have since bounced a little bit. It seems the market is pricing in more FED pain. This could lead to a bounce after the FED announcement, but that will require a more positive FED than the market is expecting, and I would not get my hopes up for that. We will get a bounce at some point soon, but probably not until after the FED speaks, and it may not be much of a bounce depending on how hawkish the FED is. The good news for bonds is that economy is continuing to sink, so we will see a FED pivot when you least expect it.

Here’s what on tap for this week as far as economic data.

• The National Association of Home Builders on Monday releases its September housing-market index, based on a survey of home builders that gauges conditions in the single-family housing market. 
• The Commerce Department on Tuesday releases August figures on house construction and building permits. Housing starts fell 9.6% in July from the month before while building permits declined 1.3%.
• The Federal Reserve on Wednesday announces its latest interest-rate decision on the heels of an inflation report showing that underlying price pressures strengthened in August.
• The Labor Department on Thursday releases the number of workers’ filings for unemployment benefits for the week ended Sept. 17. Initial jobless claims have declined for five consecutive weeks, hovering near the 2019 weekly average of around 218,000.

Here is an interesting story from Bloomberg.

Quick hit… There’s an Unusual Thing Happening in the Housing Market – Bloomberg. The take away though is:

• The team at Morgan Stanley still expects home prices to rise this year, estimating a 9% increase for 2022 and more moderate 3% in 2023.

The price you pay for a home is the static part of the equation. What you paid is what you paid. The financing can always be renegotiated. If prices are moderating now and the expectation is they will increase in the future, buy the dip!

If you would like to see how the credit market is stacking up… more people carrying a balance now for at least a year than before the pandemic and young consumers in their 20s and 30s, plus those in the lowest income brackets, are more likely than older generations to carry a balance to cover expenses like groceries, utilities and child care.

Please remain safe and stay healthy, make today great!