The extent to which the tax bill is “inevitable” remains to be seen, but at the moment, financial markets are still treating it as “highly likely”–just not as inevitable as yesterday around noon Eastern. Since then, we’ve learned that the growth “triggers” (discussed as a way to gain the votes of GOP deficit hawks) will not work under the current rules of the Senate. As such, we’re basically waiting to see what their workaround will be.
Overnight treading reflected the pause in tax bill bullishness and leaves bonds on the upper edge of their recent range (in terms of yield). That’s BETTER than yesterday, considering we’d broken above that upper edge. Let’s call it 2.4-2.42–a narrow band of yields that I’ve been referring to as the “danger zone” for 2017 bond markets for most of 2017.
In other words, the Senatorial stumbling block provided a glimmer of hope for bonds to avoid a true range breakout. In order for that hope to be confirmed, we’d need the bill to fall flat on its face today. In fact, we’d need the bill to be scrapped in the same way that health care reform was scrapped earlier this year. At this point, that seems highly unlikely, and the absence of a sharper rally in bonds (or a sharper sell-off in stocks) stands as evidence.
Today’s economic calendar leaves plenty of room for markets to focus on the outcome of the Senate vote and probable tweaks to the tax bill. The only relevant data hits at 10am with ISM Manufacturing. Even then, markets aren’t much in the mood for econ data.
MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
102-18 : +0-02
2.3954 : -0.0196
|Pricing as of 12/1/17 9:18AMEST|
Tomorrow’s Economic Calendar