According to U.S. Secretary of Commerce, Wilber Ross, the U.S. and China are apparently “miles and miles away” from reaching a trade agreement. This counters President Trump’s recent comments that the two economic powerhouses are “very, very close” to a trade solution. Stock investors are using this as a reason not to continue the climb higher that stocks have made in recent weeks. With stocks just under a critical ceiling of resistance, the timing of this seems to be more of a technical reason for not advancing even higher. With stocks taking a breather, this is providing a bit of relief in the mortgage bond market, helping to soften the trend of mortgage interest rate pricing slowly ticking higher.
As the United States enters the 33rd day of a federal government shutdown, the economic exposure levels are elevating every day. Some government economists are now saying it is possible the shutdown could drop GDP numbers for the 1st quarter of 2019 down to 0% growth. With the first quarter of every year historically being the lowest for GDP growth, combining this with 800,000 federal employees and an unknown number of private contractors not receiving a paycheck, this is certain to have a great impact on the U.S. economy. Of course, once the federal shutdown comes to an end, we will see a spike in consumer purchases as full back pay is rewarded to the 800,000 federal employees. However, the economy will not escape this mess without at least a bruise.
Mortgage bonds are back to trading within the sideways channel that has held rates steady for a couple of weeks. If this channel holds, we can float. Just be ready to lock should sentiment reverse.