Mortgage Rates Not Moving Despite Bonds Weaker

The bond and mortgage markets opened slightly weaker this morning but the bellwether 10yr note still looks firm given the lack of nearby geopolitical concerns and the global increases in equity markets. That said, everything seems to be bearish at the moment.

This morning, March durable goods orders were off the mark, but the revisions from last month compensated the report.  Weekly jobless claims jumped higher than anticipated, but did not move the 4-week average which is now a better benchmark to review.  The March trade deficit was came in better than anticipated, but close to expectations.  Just a few hours ago, March pending sales were expected to decline, but not as much as what was reported.  All four of these reports resulted in very little change to pricing.

The ECB this morning left its rates unchanged, and its policies for buying bonds unchanged. There had been speculation that with Europe’s economies improving somewhat that the ECB would begin priming the pump about an end game plan. The statement failed to provide anything for the economic bulls, saying that rates will remain at or below current levels for an extended period and well beyond the end of the asset purchase program. The ECB apparently concerned that inflation levels are still quite low at 1.5% in March. ECB is like the Fed, each wants to see 2.0%.

Trump opened his tax cuts yesterday. There is something for everyone but not going down too well this morning. There are the expected debates and criticisms, comments that cuts are tilted to the wealthy among other things. Not unusual and you should not expect anything to be accomplished in the next few months, but it is a start and the biggest attempt to revise the tax code since Reagan. One key, the proposal would slash corporate taxes from 35% to 15% and include a “one-time” cut-rate tax to induce companies to repatriate trillions of dollars of profits held overseas. Personal tax rates cut from 7 levels to three. Details are scarce now. The cuts will increase the deficit, but President Trump is saying that the increased economic growth because of the cuts will offset the loss of tax income.

At Noon, the Treasury will auction $28B of 7yr notes. Yesterday the 5yr auction was soft, this one has more direct implications for mortgage markets.