Fannie Mae-No Politics (FNMA)

[jacklanvo99]

The Wall Street Journal reported that Trump would not be seeking Federal Reserve Chairwoman Janet Yellen's resignation. But neither would he appoint her to a second term when her current term ends in February 2018. And who knows what will happen between now and then?

Trump said he would also boost infrastructure and defense spending, cut taxes, and deregulate - all of that will both stimulate the economy and be inflationary, thereby steepening the yield curve. And the president-elect has said he would call for a moratorium on new financial regulations and has often spoken of "dismantling" the Dodd-Frank financial reform law that created the CFPB.

But on the bad news side of things, the 10-year Treasury yield saw its biggest jump in three years, and yields went back to where they were in January, as investors prepared for a President Trump and a supportive Congress to sharply increase U.S. government borrowing. Wait a minute... isn't that more of a Democratic thing? Trump will not even be inaugurated until late January, much less have his plan passed by then, but his campaign proposals were radical enough that traders sold. Blame some of President-Elect Trump's proposed polices regarding tax cuts, fiscal stimulus, and infrastructure spending. In addition, the stock market staged quite a turnaround. Go figure.

Treasuries initially rallied on the massive risk-off trade with the 10-year note hitting a low of 1.72%, versus the 1.86% close, before ripping higher hitting a high yield of 2.09% just after the sloppy 10-year auction, for an intra-day range of 37 basis points - larger than even the 30 bp range in the post-Brexit trade. Our benchmark 10-year price sank over 1.75, 5-year Treasury securities sold off .625, and agency MBS prices followed but not as badly.

Looking at the big picture, remember this verbiage from the FOMC's meeting last week? "The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction, and it anticipates doing so until normalization of the level of the federal funds rate is well under way." But what if principal payments go down? With the higher rates comes less chance of the Fed receiving money from rate & term refis and thus early payoffs to purchase more agency MBS. That's a bit of a double whammy (higher rates lead to fewer refinances, fewer refinances lead to less Fed purchases, less Fed purchases lead to higher rates), although with many areas appreciating cash-outs are picking up. And there are borrowers selling their homes and moving up. ......
http://www.mortgagenewsdaily.com/channels/pipelinepress/11102016-donald-trump-janet-yellen.aspx