Tax Reform Almost Law

Senate Republicans approved the Tax Reform Bill yesterday.  The House also approved the bill.  However, they violated a Senate procedural measure known as the Byrd Rule.  As a result, they will have to re-vote on the bill today.  The House vote is expected to pass, so the final bill could be on the President’s desk as early as this afternoon.  That would meet the anticipated deadline of Christmas, and would then give Republican politicians a reason to celebrate this holiday season.  Democrats, on the other hand, are 100% against the bill.  With not one single democrat voting for the change, this highly divisive bill is sending shockwaves through the Democratic party. 

The sharp downward move in the bond market this past week has pushed mortgage interest rate pricing higher.  It seems to be heavily influenced by the technical picture as well as the gut reaction to the Tax Reform bill.  Hopefully, the markets will stabilize once the anticipation of the bill is over and Tax Reform is signed into law.  The increased tax savings will be in place at the beginning of January, so many will see their net pay check move higher.  This incremental move on a per worker basis should commutatively create a small bump to the US economy in Q1 of 2018.  However, the longer-term impact is more difficult to predict. 

With bonds under continued pressure, we will maintain our locking bias.