A For Effort, But a C- For Infrastructure

A For Effort, But a C- For Infrastructure

Ahead of Biden’s $550 billion infrastructure plan (which we will get to), the American Society of Civil Engineers gave the US a test… and it was not graded on a curve. After an evaluation of the countries roads, buildings, water system, internet, etc. the society gave us a C-. We wouldn’t have to retake the class, but it’s not good.

 

Recent administrations have insisted on projects to revamp the countries infrastructure but none of them have delivered in a meaningful way. President Trump talked about an ‘Infrastructure Week’ for years that never came to be.

However, the empty promises of multiple administrations wasn’t for a lack of trying! In the past, mass infrastructure spending was frozen because congress and the administration could not come to a deal. Luckily, a tentative $550 billion deal was agreed upon.

 

This deal includes

  • $110 billion in new spending for roads and bridges
  • $73 billion for power grid upgrades
  • $66 billion for rail including Amtrak
  • $65 billion for broadband expansion
  • $55 billion for clean drinking water
  • $39 billion for transit

Source: Biden’s Infrastructure Bill Sets Up States for Road Windfalls

 

Sounds Expensive:

Maybe. The Biden Administration claims that this massive spending will not be reflected in higher taxes but largely from unused cash in Covid Aid Funds. In addition, they plan to collect taxes on crypto investments and sell billions in oil reserves.

 

On to the rates:

On Tuesday, we talked about wanting to lock because the MBS market entered into some over-bought territory based on the stochastics. Well, the MBS market took a tumble yesterday falling to their 200 DMA and has broken well below it today – down 22 bps from yesterday.

Today, we got initial jobless claims right where we expected them, 385k. We will be getting BLS Jobs Report tomorrow which has been very impactful to the MBS market in the last few months. If this number missed expectations and fewer jobs are created, mortgage rates will get better. Because of the downward momentum in the MBS market and the volatility that the BLS report could produce, we are holding a locking bias.