Mortgage Rates Leaving the 2017 Lows Behind

Mortgage rates are moving higher so far today, leaving the 2017 lows behind them.  Equity markets following through from yesterday’s rally into trading this morning. The 10yr yield hit 2.30% yesterday but then backed off to 2.27% at the end of the day.  This morning it started at 2.30% and at 11AM, it is at 2.31%, with MBSs trading at a negative 18 BPS.  We had two housing price data points this morning, the February Case/Shiller and February FHFA, both showing large price increases of homes. This is old data but still important indicating home prices continue to improve.

The weekend vote in France still resonating around the world that Le Pen the right winger that would take France out of the EU and likely shake the EU to its core will not likely win in two weeks in the run-off against the centrist Macron. According to the latest poll, Emmanuel Macron leads National Front candidate Marine Le Pen by 22 points for the run-off vote on May 7.

Trump wants a 15% tax rate for corporations, down from 22% now and is saying he is not concerned that tax cuts will increase the Federal debt. He will focus on corporate and small-business taxes, while leaving for 2018 individual tax cuts that will require much more debate and rancor. He is expected to release his tax cut framework tomorrow. On the debt ceiling that must be increased by the end of the week, he also is saying he may remove his demand for funding the border wall for the time being from the budget debt extension. In the end, there'll likely not be another government shutdown due to debt limits, we went through that a few years ago and no one in Congress or any administration wants that again.

Two major reports at 9:00AM, March new home sales expected down, came out better than forecasted even with the revision that saw February numbers decrease.  This increase adds more confirmation that NAHB is correct advocating better sales this year. April consumer confidence expected higher results, but was weaker than anticipated but not too much of a worry came out of such – as the number still shows a very strong level of confidence. There was no noticeable market reaction to the two data points.

Today, we kick off three straight sessions of dumping our short-term debt into the eager beaks of the marketplace. Today's 2-year note is too short of a term to impact the longer end of the yield curve.  North Korea holds its largest ever military drill as our U.S. Naval Nuclear Sub docks in South Korea. President Trump looks to hit Canada with soft lumber and dairy measures, also said to be willing to put the wall on the back burner to avoid government shutdown and is looking to release more tax info tomorrow.

The bond market at critical technical support at 2.30%/2.32%. Have to be concerned at this level for mortgages and bonds as the technicals are back to neutral after being bullish the past two weeks. The data came out and what is left, I am not expecting any move higher from where we are now.  


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