Mortgage Rates Tried to Move Upward - But Does Not Succeed

Mortgage rates basically tried to move upward today with very little success as markets braced for the impact of political developments.  The big issue of the day was (and still is) the healthcare bill set to be debated in the House of Representatives tonight.  The big issue is that this vote will not happen tonight – and may not happen until Monday.

Healthcare is the current key, without it there can be no definitive budget. No budget, no tax cuts and no fiscal spending, at least in the near future. “Republican leaders remained short of the support needed for their health plan just hours before a scheduled vote in the House, with President Donald Trump continuing his personal lobbying of wary GOP lawmakers”, according to the WSJ. According to the article in the Journal this afternoon prospects for the Republican plan to overhaul the Affordable Care Act darkened Thursday. This is politics and the first time Trump and Ryan face a major vote. What we hear is that even if it does slip through the Senate will be even a higher hurdle.

This was all the news today as one minute it was good – then bad – then not so much…. Basically, you can draw your own conclusions that there are not enough vote to pass it now.

 Today’s data did not shake up the markets, even though we had some strong numbers in new home starts. Tomorrow, the only data is February durable goods orders.

There should not be much movement tomorrow in the bond and mortgage markets.  I do expect a little more the same whereas the MBS by see a negative number and the 10yr, at one point again at 2.37% today, might look to go higher than where it closed today at 2.42%.

In summary, if the bill is passed, investors will be more keen to believe in the viability of other legislation more germane to financial markets (like tax cuts, other stimulus, and regulatory reform).  Those "other" policy points were key reasons for the sharp move higher in rates at the end of 2016.  If confidence increases, it could put the same pressure back on rates.  But if investors lose confidence in the policy potential, stocks and bonds would have more motivation to move lower – of which we have seen the past few weeks.