Yellen and Powell Face Congress

Good morning everyone! I hope that your week is off to a great start.

Every real estate publication is talking about the massive hit that new home sales took this morning compared to the two month tear they have been on. The US Census Bureau concluded that new home sales dropped by over 18% in February. Now, there may have been an organic slowdown; however, this is at the same time that Texas and other states were dealing with dangerously cold weather that likely played a part in the huge drop. We are going to wait until we have March’s new home sales to state the trajectory of new home sales in general.

Today, our Treasury Secretary and Fed Chair Yellen and Powell are going to testify in front of congress regarding Covid aid. The combination of Yellen being the large dovish spender that she is and Powell making it clear that we are no where near recovery and need to take immediate action should make for an interesting meeting. In Powell’s preliminary statement to the meeting he hit on the fact that recovery is coming faster for some sectors than originally expected. But, those hit hardest by the pandemic remail very weak citing the massive unemployment rate.

Mortgage Backed Securities are off to a beautiful start this morning, up about 20 bps. Like we said yesterday, we do not think this is any indication of a directional change as MBS’ are on a clear downward trajectory. The meeting with congress has the ability to swing the MBS market either way. But we always say, we would rather be locked and wish we were floating than floating and wish we were locked. We hold a locking bias.

Have a great day!