Market Update provided by Rhiem Penman

On Friday mortgages closed slightly tighter to treasuries and several ticks tighter to swaps.  FN30 3.0’S closed up 3 ticks while 3.5’s and 4.0’s were up 2/32nds.  The street reported $1.67B in origination volume on Friday, slightly below the 56 day average of $1.75B.  MTD volume is at $39.0B.

The Federal Reserve Bank is scheduled to purchase a total $3.775B in agency MBS this week, $1.975B in GNMA’s and $1.800B in conventional.  Today’s activity includes $1.125B in GNMA-II 3.0’s, 3.5’s, and 4.0%.

There are no Fed speakers scheduled today however Chair Janet Yellen is scheduled to speak Tuesday at the National Community Reinvestment Coalition Annual Conference and Fed Governor Jerome Powell is also scheduled to speak Tuesday.  On the supply side, the Treasury is scheduled to auction $26B in Two-year notes today and $34B in Five-year notes tomorrow.

The big news from Friday was the lack of a vote on the health care bill. The news moved prices lower after the 3PM (noon PT) future’s close due to reports that AHCA had been pulled due to shortage of votes. What happens now is anyone’s guess, and plenty of pundits are saying tax reform should have been tackled first. With the health care bill setback, it may be tougher to gain momentum to do much to taxes. Regardless, the “risk-off” trade is gone, and money is flowing into the “defensive” bond markets – helping rates. The thinking that is President Trump’s inflationary economic ideas may not move through Congress easily.

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