Mortgage Rates Moving Upward

Mortgage rates are moving upward today on what has transpired overseas.  The French election yesterday has sent stocks up in Europe and here in the US. Le Pen and the centrist Emmanuel Macron both won and will face off in two weeks on May 7th. From reactions on CNN this morning, it looks like when President Trump won the election. French stocks led a rally in European equities, with the benchmark CAC 40 climbing by over 4% as the share prices of banks recorded close to double-digit gains. All main global equity markets are improving today except China’s markets. The reaction is a clear indication that Macron will win and beat Le Pen, she wants to exit the EU. No more waffling now in terms of expectations, the fear of France leaving the EU and likely taking other EU countries with it has presently been washed away.

There are no economic releases today, but the week has a number of data points. This week also key for Congress to pass a debt extension to keep the government running. Trump wants money for the Wall but facing strong resistance from Democrats. Will the government shut down? No, that is highly unlikely, but it still increases the uncertainty in Trump’s ability to get things accomplished with Health Care, tax cuts, cutting regulations and fiscal spending; all continuing to find resistance. The other political issue this week, Trump has said he will reveal his wide-spreading tax cut plans on Wednesday. Once released officially it will be chopped into pieces that are not likely to find enough support to pass them as released. Paul Ryan and Treasury Sec Mnuchin both hinting that it is unlikely a tax bill will be offered until late this year and possibly not until next year.

At 11:00AM, with the stock markets seeing some big gains like the rest of the world (except China), we have seen the 10yr after crossing over to 2.31%, has come back down to 2.27% as well as MBS prices after large negativity early, still a minus 5BPS.

The reaction this morning to the French election is excessive and mostly short positions being lifted with bank stocks pushing the DJIA higher. At 11:00AM, with the stock markets seeing some big gains like the rest of the world (except China), we have seen the 10yr after crossing over to 2.31%, has come back down to 2.27% as well as MBS prices after large negativity early, still a minus 5BPS.

This week we have some strong economic releases that for a change could influence mortgage rates. The focus will be on Thursday's Durable Goods Orders Ex-Transports as a proxy for business/capital spending. Next up will be Friday's GDP data where we get a first look at the first QTR GDP.

The Fed is still talking two more rate increases this year, but each Fed official that echoes that idea ends their comments with caution based on the economy. The Fed is not completely in line with those very bullish forecasts and continues to hedge with the usual caveat.