Small Business Confidence Drops

Good morning everyone!

We continue to hear about how the economy is recovering as business restrictions are lifted and our unemployment drops. However, at the same time, optimism of small businesses is falling. We got the NFIB Small Business index in this morning which gets a general measurement of confidence around small business from consumers. The most recent reading came in at 95 – the lowest reading since the beginning of the pandemic in May 2020. We will see how the vaccine rollout effects this number but many assumed that it was going to come in much higher.

Mortgage Backed Securities have seen a decline for the past 2 weeks. Now remember, one of the major downward forces in the MBS market is the gains the 10 year treasury has seen – the two markets often move in opposition. In mid-January, the 10 year hit a Fibonacci ceiling and fell below for the last month. Yesterday, that ceiling was tested again and held strong, not letting the 10 year break through. This is good news for mortgage rates and know that the more times a ceiling is tested and holds, the stronger and stronger that ceiling becomes to investors. Mortgage Backed Securities are now hovering above their 200 DMA which has proven to be a strong floor. However, while we have a strong floor, MBS’ are being pinched between it and a triple ceiling of the 25, 50 and 100 DMA. Because of this strong ceiling, we are holding a locking bias.