On this day in 1800 President John Adams ordered the Federal Government to pack up and leave Philadelphia and move operations to its new home in Washington DC. At the time the Federal Government had 125 employees and the transition took one month. Two hundred and seventeen years later there are now more people employed by the government than in the manufacturing sector.
Speaking of politics I never thought happenings within the FBI would impact mortgage rates. Last week’s controversial firing of James Comey may be helping US interest rates improve. Why? The politically unpopular firing of the former FBI director may encourage those in congress to oppose the President’s proposals on tax reform and infrastructure spending which were generally deemed to be favorable for the stock market and therefore unfavorable for interest rates.
The US yield curve is flattening. The spread between the yield on the US 2-year & 10-year note is now at the lowest level since the election.
This is a signal that the financial markets are less optimistic about the long-term outlook for economic growth. This is also a result of the fact that the Fed continues on a path to hike short-term interest rates. The Fed next meets on June 13th-14th.
From a technical perspective interest rates are in a favorable range. Momentum is on our side but oil prices are moving higher this morning so we’ll want to keep an eye on that market (energy prices are highly correlated to inflation).
Current Outlook: neutral