Rex Tillerson Ousted

“Rexit” was formally announced this morning, following President Trump’s Tweet that he officially fired Secretary of State, Rex Tillerson.  The surprise move was another shake-up in what has been a bit of an unstable Trump Administration.  It puts an end to the tumultuous relationship between Trump and Tillerson, which often was demonstrated through public disagreements.  This would generally be viewed as bond-friendly news, which is contributing to bonds performing a bit to the upside so far this morning.  Stocks, on the other hand, are still higher.  However, I would expect that we will see stocks reconsider their gains as the day wears on.

Consumer Inflation news was released this morning, with the Consumer Price Index (CPI) showing an increase of 0.2% on a month over month basis.  Since this measures the prices consumers pay for goods and services, this is one of the most important reports to mortgage interest rates.  Although the increase matched expectations of 0.2%, the important reading is the year over year reading which rose from 2.1% up to 2.2%.

Mortgage bonds are currently battling their 25 day moving average.  Since bonds haven’t convincingly been above this critical level since early September of last year, this is an important event to the near term direction of mortgage interest rates.  If bonds are able to make a break above this level, we could see a bit of an improvement to mortgage rates.

Unless bonds are able to break above their 25 DMA, we will maintain our locking bias.