Yesterday, mortgages were 3/32 tighter to treasuries (outperform) with origination supply coming in at ~$2.0B for the day. Treasuries finally got some relief as the White House’s tax plan lacked the clarity that market was looking for. For the day, benchmark 10-year notes rose 7/32 pushing yields to 2.31%., while 30-year bonds were 11/32 higher pushing yields to 2.96%. In the MBS space, the FN 30 year 3.5s in May rose 5+/32 (102-20) while FN 15 year 3.0s were up 2+/32 (102-23+). The 30 year Gold/FN spreads were unchanged in the 3.5% coupon at -.5/32. The 15 year Gold/FN spreads were also unchanged in 3.0% coupon at .5/32.
Lenders are reporting that 30 year primary rates are in the 4% to 4.25% range. As far as a 30 year best execution analysis goes, in general these note rates are slotting into a 3.5% coupon with 4% and 4.125% executing via a buydown, and the 4.25% executing via a buyup.
In Wednesday’s news, the White House provided a high level outline for its proposed tax cuts, which seem to benefit business, middle class and certain high-earning individuals. The main component would be a reduction in the corporate tax rate from 35% to 15%. For individuals, it would cut the top rate from 39.6% to 35% and condense the seven income-tax rates to three. It would also remove a 3.8% income tax for individuals making more than $200K a year, end the alternative minimum tax and get rid of estate tax for select net worth buckets. The market response was rather muted as the plan did not lay out any details as to how the proposed plan would be paid for, which is obviously a major component of the new structure.
On Wednesday, stocks were slightly in the red for the trading session as investors lost their appetite for higher risk assets. The Dow fell 21.03 points, or 0.1%, to 20,975.09, the S&P 500 lost 1.16 points, or 0.05%, to 2,387.45 and the Nasdaq dropped 0.27 points, or 0%, to 6,025.23.