Morning Report: Obamacare repeal and Trump reflation trade dead 7/18/17

Vital Statistics:

Last Change
S&P Futures 2456.5 -2.0
Eurostoxx Index 383.9 -3.0
Oil (WTI) 46.0 0.0
US dollar index 87.0 -0.4
10 Year Govt Bond Yield 2.31%
Current Coupon Fannie Mae TBA 103.31
Current Coupon Ginnie Mae TBA 104.375
30 Year Fixed Rate Mortgage 3.96

Stocks are lower this morning after healthcare reform fails. Bonds and MBS are up small.

We are in the summer doldrums, with not much in the way of news or movement. Monday was so dull it felt like a 3 day weekend in the markets.

Obamacare repeal (and the lower spending that ensued) was going to be the source of funds for infrastructure spend and tax reform. So that pretty much sticks a fork in the Trump reflation trade. This should send rates lower, at the margin. Don’t forget the 10 year was trading below 1.9% before the election. Economists now see an even risk of overshooting and undershooting their GDP forecasts, the highest since the election.

The Fed Funds futures aren’t really reacting to the news yet, with September futures pricing in only an 8% chance of a hike and the Dec futures pricing in a 47% chance of a hike.

The Senate is considering a last-ditch attempt to simply repeal Obamacare without a replacement and then try and create a healthcare plan from scratch.

Import prices fell 0.2% in June and are up 1.5% YOY. Export prices are down 0.2% as well and up 0.6% YOY.

Homebuilder confidence slipped in July, according to the NAHB. “Our members are telling us they are growing increasingly concerned over rising material prices, particularly lumber,” said NAHB Chairman Granger MacDonald, a home builder and developer from Kerrville, Texas. “This is hurting housing affordability even as consumer interest in the new-home market remains strong.”

The House Appropriations Committee approved a bill to reform the CFPB. The biggest change will be to bring the agency under the normal appropriations umbrella, although there will be language regarding payday lending and mandatory arbitration.

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