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Warning: Why the X Date Matters

May 22, 2025
Floating
The House passed President Trump’s “One, Big Beautiful Bill,” which is the new tax and spending bill. This is causing fear in the Bond market because it could very likely add to our debt levels and result in more Treasuries that need to be issued, which will have to be absorbed by the Bond market.

Stocks and Mortgage Bonds are both lower so far this morning.

Yesterday, a weak 20-year Treasury Auction caused the Bond market to selloff. Additionally, global yields have been on the rise, pressuring US yields higher, and Moody’s recently cut our credit rating.

The House passed President Trump’s “One, Big Beautiful Bill,” which is the new tax and spending bill. This is causing fear in the Bond market because it could very likely add to our debt levels and result in more Treasuries that need to be issued, which will have to be absorbed by the Bond market.

This is extra concerning for the Bond market because we are already at the debt ceiling, and if this bill increases our debt, we will have to raise it even higher. Worldwide, yields have been rising on debt concerns with Japan and Germany as prime examples.

In August of this year it is projected that we will reach X date, or the date the Treasury department is no longer able to fund the government or pay our debts through their Extraordinary Measures.

We've previously seen this playout in June 2023, when then Treasury Secretary Janet Yellen had to nearly deplete the Treasury General Account to keep our debts paid. 

Existing Home Sales

Existing Home Sales fell 0.5% in April at a 4M unit annualized pace, which was worse than the slight gain expected. Year over year, sales are down 2%. Sales are well below where they would normally be at this time of the year, which means there is a lot of pent up demand that continues to grow. A drop in rates would likely result in a big surge in purchases.

The Median Home Price rose 1.8% from last year to $414,000. Inventory rose 9% from March and 21% year over year, ending the month with 1.45M units for sale.

Putting together the pace of sales and inventory, there is a 4.4-months’ supply of homes, which was higher than 4 in March, but still slightly less than a more balanced market at 4.6 months.

Homes remained on the market for 29 days, down from 36 days in March. 18% of home sold above the list price, which was down from 27% last year.

First-time home buyers made up 34% of transactions, up from 32% in March and 33% in April of last year. Cash buyers accounted for 25%, while Investors made up 15%...both slightly lower than this time last year.

Cotality Single Family Rent Index

Single-family rent prices rose 2.9% year over year in March, which was unchanged from the February report.

The 2.9% reported by Cotality is much lower than 4% in the CPI and PCE reports. If they were caught up, and based on the weightings, CPI would be 2.3% from 2.8% and PCE 2.4% from 2.6% for the latest readings. Bottom line: Inflation is already making good strides in the latest reports, and we expect more next week with PCE.

Initial Jobless Claims

Initial Jobless Claims, which measures individuals filing for unemployment benefits for the first time, fell 2,000 to 227,000. Not much new here, as this figure has been very stable around this level.

Continuing Claims, or those who continue to receive benefits after their initial claim, rose 36,000 to 1.9M. This is the second reading above 1.9M in the last few weeks and the second highest level since November 2021.

It shows that once someone is let go, they are staying on benefits longer because it’s harder to find a job, likely because there is less hiring.

Technical Analysis

Mortgage Bonds have continued their downward trend, trading near the upper bound of a wide range, with support at 99.91 and a ceiling at 100.31.

The 10-year is currently testing support at the 4.588% Fibonacci Level. If yields are able to break beneath this level there is plenty of room for improvement before reaching the next support level at the 100-day Moving Average.

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