Mortgage Markets Off to a Good Start Today

A good start this morning in the bond and mortgage markets. Yesterday the 10yr found resistance at 2.22% when US stock markets rallied (DJIA +183).  This morning the 10yr started this morning at 2.23% and MBS are showing positive numbers after being negative yesterday.

March Housing Starts were lighter than expected (1.215M vs est of 1.25M) and Building Permits were higher than expected (1.26M vs est of 1.24M). This report is right when the East coast had those massive storms which certainly impacted the number of housing starts. The strength appears to be on the multifamily side with permits up 14% to hit 437K. SFR (the bread and butter of the real estate market) fell -1.1% to hit 823K.

The March Industrial Production report matched the market forecast of 0.5% and was a nice improvement over Feb's 0.0% reading. We did see a pullback in factory hours worked but that is likely also due to the storms in March.

US stock indexes do not have the power any more to rally two days in a row.  At 10:30AM, the DJIA is down 126 and the NASDAQ and S&P are following the same.  On the flip side, the 10yr is now at 2.20% and MBSs are a positive 8BPS.

Theresa May, Brit prime minister is calling for a snap election in June to take the UK through the Brexit over the next two years. She will likely win but wants another election to solidify her mandate to take the UK through the exit. There has been some pushback from the opposition, she wants complete control that will make her position easier to deal with the details.

Christine Lagarde, IMF, saying today US growth will be 2.3% this year, about half of what was expected when Trump won the election last Nov. Those tax cuts, fiscal spending plans, and other optimistic outlooks that catapulted stocks higher are now facing the reality that most will not happen this year to effect US growth. She also increased the IMFs global growth to 3.5% in 2017 and 3.6% in 2018. She also warned of low productivity and high income inequality as headwinds to the IMF forecasts.

In France two were arrested plotting an “imminent and violent” terrorist attack ahead of the first round of the country’s presidential election this weekend. France has for two years been under a state of emergency in the face of a string of attacks by Islamic extremists in Paris and elsewhere that have left more than 230 people dead since 2015. The first of two elections will take place this Sunday.

I am going to continue to float with caution, unless closing in the next 15 days.