Mo Money, Mo Problems

Mo Money, Mo Problems

US household debt jumped by $313 billion (the largest quarterly jump in the last 14 years) to an all time record of almost $15 trillion in the second quarter.

 

Quiz

Why do you think debt jumped so high?

  1. US tax payers subsidized Jeff Bezos space journey
  2. Americans maxed out their Amex on Kanye’s new Gap line
  3. Millions of people are cashing out equity in their rapidly appreciating homes

 

If you chose C, you’re right (well, mostly right)! The combo of all time low rates and record appreciation created a no-brainer for homeowners across the country. Millions of people were able to take equity out of their homes with a cash-out refinance with rates close to what they already had. Both credit card and auto debt rose over the same time but the majority was gained in the housing market.

 

Check out our Digital Loan Officer to see if cashing in on some sweet, sweet equity is a good idea for you!

 

The rates:

Mortgage backed securities continue to climb higher as the 10 Year yield falls. They are now sitting on top of a triple floor made of their 200 DMA, a Fibonacci level and their high from July.

As you can see from the two neon green lines, MBS’ are on a clear path upward. However, in addition to the pricing chart, we need to consider the technical signs in the market. The MBS has been on a tear since the middle of June and has a ton of momentum behind them. However, they are pushing forward into overbought territory. The technical measurement is called stochastics which essentially operates on the idea that security movements lose momentum before changing direction. MBS’ are starting to lose steam and according to the stochastics are due for a short-term correction. Because of the busy news week ahead and the fact that the floors below us have not been tested, we are switching to a locking bias.