Stocks and Mortgage Bonds are both higher to start the day.
Bank Deregulation
The Federal Reserve has proposed a rollback of capital requirements that could unlock billions by lowering reserve thresholds, which would give banks more room to lend. The proposed rule would lower capital requirements to a range of 3.5% to 4.5% from 5%. Treasury Secretary Scott Bessent believes if this proposal is enacted we could see tens of basis points in benefit to Treasury Yields, which could help move mortgage rates lower and unlock more activity.
Durable Goods Orders
Durable Goods Orders, which measures larger durable purchases in the US, rose by 16.4% in May, which was much stronger than the 8.5% expected increase.
Core Durable Goods was reported up 1.7%, higher than the 0.1% increase expected. Core Shipments, which gets directly plugged into GDP, came in at 0.5%, better than the estimate of down 0.1%
Initial Jobless Claims
The BLS reported that Initial Jobless Claims, which measures individuals filing for unemployment benefits for the first time, fell slightly from 246,000 to 236,000.
At the same time, Continuing Claims, which measures individuals who continue to receive benefits after their initial claim, rose from 1.937M to 1.974M.
It’s clear that more individuals are getting let go, and once that happens, it’s harder for them to find a job because they are staying on unemployment benefits for longer. Also remember that in most states, you can only stay on benefits for 26 weeks, so this figure continues to climb even with those falling off due to expiration.
Pending Home Sales
Pending Home Sales, which measures signed contracts on existing homes, rose 1.8% in May, which was stronger than estimates of a 0.5% decrease. Sales are now up 1.1% year over year.
GDP
The third and final reading on Q1 GDP was reported at -0.5%, which is weaker than -0.2% in the second look.
Personal spending was weaker than expected, rising by only 0.5% from 1.2% in the second look. This slowdown can be a signal of less pricing pressure, which would mean lower inflation.
Technical Analysis
Mortgage Bonds are currently testing the ceiling at 101.57. If this positive momentum continues there is a lot of room for improvement before reaching the next ceiling all the way up at 102.09, which is the high from April 4.
The 10-year has broken beneath its 200-day Moving Average. There is a lot of room for Yields to improve before reaching the next floor at the 4.126% Fibonacci Level.
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