Mortgage Rates Swinging in the Pendulum

The bond markets started generally unchanged this morning. Two issues facing markets over this weekend are the French elections on Sunday and next week’s debt ceiling that will expire on the 29th (next Saturday). Of course, no one is expecting a partial government shutdown as there will be a deal made before the end. Trumps administration wants more money for defense, the fence and boarder defense. Democrats want more money for the insurance companies to keep health care functioning.  Democrats do have more leverage now in the debt extension and Republicans are going to need some Democrats in both the Senate and House to pass a spending bill. At the final hour, there will be some kind of deal to keep the government running. NO one wins if the government is forced to shut down.

The stock market rallied yesterday on comments from Treasury Sec Mnuchin when he said the administration would release its tax overhaul “very soon.” Meanwhile in the House speaker Ryan is saying a tax cut bill may not likely to emerge until late this year. Trump’s advisers want to break the take cuts into two parts, the first being corporate and small-business taxes, while leaving for 2018 what they called the “maddeningly complex individual income tax system.” More evidence that the Trump policies he espoused in the campaign are not likely to occur at the speed equity market investors had believed until recently; now investors are increasingly realizing the Trump rally may be fizzling.

The Paris shootings have added more confusion and uncertainty to the French election on Sunday. Lots of bickering over there and who know who will win.

At 11:00AM, the MBSs are quiet and the 10yr is down to 2.22%.  Looks like we are in the pendulum mode again, but I do believe there will be movement once the election results come in overseas.  The reports today showed the March Existing Home Sales data was much stronger than expected

The geo-political concerns have ebbed recently, there is less momentary demand for safety now - equally there is no reason for safety trades to be removed. The French election and although the fears over North Korea, Syria, Afghanistan are not buried. Yesterday North Korea showed a video of a missile attack on the US. There is also a re-think about the economic growth in the US this year, investors beginning to believe the 3.0% to 4.0% growth Trump promised is not going to happen and this year will mirror last year with miner 2.0% growth.

Stay focus and keep in mind your risk tolerances, as today’s rates are very attractive as we thought just a few months ago that we may have lost them forever.