Bonds Rallying + Housing Heating Up!

Mortgage Bonds Rallying

Weak economic data is fueling a bond rally today. Here is the breakdown:

Retail Sales Miss

• Headline: 0% (vs. 0.4% expected).
• Core: Fell 0.1% (missing expectations by 0.5%).
• Impact: Previous months were revised lower. Weak consumer spending is pushing bonds higher.

Inflation & Wages Cooling

• Employment Cost Index: Dropped to 0.7% in Q4, signaling decelerating wage pressure.
• Consumer Expectations: Inflation expectations fell to a 7-month low of 3.1%.

Labor Market Softening

• ADP Data: Private employers added a meager ~6,500 jobs/week recently.
• Trend: Revisions are trending lower, confirming a weak labor backdrop.

Housing Heating Up

• MBS Highway Index: Jumped +9 points to 43.
• Buyer Activity: Surged to 47 (up from 38 last year). Lower rates are clearly boosting demand.
• Outlook: If rates stay in the low 6% range, the index could soon reach expansion territory (>50).

Forecast & Technicals

• Tomorrow: All eyes on the BLS Jobs Report. Market expects +70k jobs, but leading indicators suggest a likely miss.
• Charts: Mortgage Bonds broke above the 25-day Moving Average. The 10-year broke support and appears poised to test 4.12%.

Momentum is on our side!