June 7th, 2021 10:57 AM by Richard Sardella MLO.100007700/NMLS 233568
US Treasury is moving ahead with Janet Yellen’s global minimum tax for the large and multi-nation tax deal, 15% minimum tax on all businesses doing business globally. She met with G-7 countries over the weekend. In a simple comment, it isn’t likely to fly in the US Congress. The idea is to control countries from tax wars where countries race each other to the bottom to attract businesses. It has been talked about over the years but always died a quick death; this time it may take longer to succumb, but it will. More talks are scheduled next month at the G-20 meeting in Italy. Any accord must also have support from a majority of about 140 nations involved in negotiations under the Organization for Economic Cooperation and Development. After that, Yellen will have to convince Congress, and that will be difficult with Republicans. American companies will be at a significant disadvantage until other governments agree to hamstring their own firms.
“The Biden Administration hopes these global tax rules will make it easier for American progressives to run rampant through the US tax code without harming the economy. That hope is receding as the realities of the deal come into focus. American workers, consumers and shareholders will pay the price.” (WSJ)
Last Friday, a key technical day for the US interest rates; May employment data wasn’t anything spectacular but enough to generate buying of treasuries. The 10 yr. note gathered momentum Friday morning, and its yield dropped 8 bps to the longer-term technical resistance at 1.55%, where buying stopped on the proverbial dime. 1.55%, the lowest 10 yr. rate going back to mid-March. This morning the 10 y up 2 bps at 1.57%.
This week, most of the potential market movement will be focusing on Washington and the Biden infrastructure bill that is slowly moving to a vote. Republicans and a few centrist Democrats are not jumping on the bandwagon with the present bill, but the leader of the opposition, Senator Joe Manchin, said Sunday he won’t support the For the People Act passed by House Democrats, potentially dooming the legislation. He also said he wouldn’t support ending the filibuster rule. The voting bill looks dead presently.
At 9:30 am ET, the DJIA opened +31, NASDAQ -12, S&P +1. 10 yr. 1.57% +2 bps. FNMA 2.5 30 yr. coupon -8 bps from Friday’s close and -3 bps from 9:30 am Friday morning.
This afternoon at 3:00 pm April, consumer credit is expected +$20B.
This week, there are only two data points that matter; weekly claims and May CPI, both out on Thursday. Treasury will sell 10s and 20s that will be closely watched.
It will take additional negative news for interest rates to break below 1.55%, a two moth trading range low.
PRICES @ 10:00 AM ET
10 yr. note: 1.57% +2 bp
5 yr. note: 0.80% +1 bp
2 Yr. note: 0.16% +1 bp
30 yr. bond: 2.25% +2 bp
Libor Rates: 1 mo. 0.081%; 3 mo. 0.128%; 6 mo. 0.164%; 1 yr. 0.246% (6/4/21)
30 yr. FNMA 2.0: @9:30 100.98 -8 bp (+3 bp from 9:30 Friday)
30 yr. FNMA 2.5: @9:30 103.50 -8 bp (-3 bp from 9:30 Friday)
30 yr. GNMA 2.5: @9:30 103.19 -5 bp (unch from 9:30 Friday)
Dollar/Yuan: $6.3974 +$0.0022
Dollar/Yen: 109.22 -0.32 yen
Dollar/Euro: $1.2175 +$0.0009
Dollar Index: 90.04 -0.09
Gold: $1890.80 -$1.20
Bitcoin: 36,457 +519
Crude Oil: $69.72 +$0.10
DJIA: 34,724 -32
NASDAQ: 13,804 -10
S&P 500: 4222 -8
Richard Sardella has been actively managing and providing services in the mortgage industry for over 27 years. Richard serves on the board of directors as President of Colorado Home Mortgages Inc.
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MLO of record MLO.100007700 / NMLS#233568 / CHM NMLS#127716.