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Markets Digest New Tax Plan

MARKETS DIGEST NEW TAX PLAN

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The bond and mortgage markets opened slightly weaker this morning, but the bellwether 10-year note still looks firm given the lack of nearby geopolitical concerns and the global increases in equity markets. That said, our technicals are slightly bearish now for the 10-year.

8:30 AM EST data this morning. March durable goods orders expected +1.1% were +0.7%; excluding the volatile transportation orders expected +0.4% were down 0.2%. Revised increases from Feb offset the less than expected March orders. Orders in Feb revised from +1.7% to +2.3%; excluding transportation from +0.4% to +0.7%. March core capital goods +0.2% and Feb core revised from -0.1% to +0.1%.

Weekly jobless claims expected -1K to 243K, claims jumped to 257K +14K. The 4-week average at 242.25K from 242.75K.

March trade deficit was expected at -$65.0B, as reported -$64.8B. Exports -1.7% (Feb revised from -0.1% to +0.4%), imports -0.7%.

The ECB this morning left its rates unchanged, and its policies for buying bonds unchanged. The deposit rate will remain at -0.40% and asset purchases will continue to run at €60B/month through the end of 2017. 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 like the Fed wants 2.0%.

At 9:30 the DJIA opened +20, NASDAQ +12, S&P +2. 10 year at 9:30 unchanged at 2.31%. FNMA 3.5 30 year coupon -3 bps from yesterday’s close and +16 bps from 9:30 yesterday.

President Trump opened his tax cuts yesterday; There’s 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’s 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 at the moment. 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.

Trump was calling for an end to NAFTA recently, but business leaders balked, now Trump has backed off his original tough talk. The Trump administration signaled its commitment to NAFTA.

At 10:00 March pending home sales, expected to have declined 0.4% as reported -0.8%; the index at 111.4 from 112.3 in February.

At 1:00 pm this afternoon Treasury will auction $28B of 7-year notes. Yesterday the 5-year auction was soft; this one has more direct implications for mortgage markets.

Source: TBWS

All information furnished has been forwarded to you and is provided by thetbwsgroup only for informational purposes. Forecasting shall be considered as events which may be expected but not guaranteed. Neither the forwarding party and/or company nor thetbwsgroup assume any responsibility to any person who relies on information or forecasting contained in this report and disclaims all liability in respect to decisions or actions, or lack thereof based on any or all of the contents of this report.

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