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Policy Implementation Concerns Continue to Suppress the Reflation Trade

Yesterday’s risk-off trading mentality carried over into today’s session as global markets continue to question the chances of success for new policy implementation by the Trump administration and absorb news of a terrorist event today in London.  Tomorrow’s vote on the repeal and replacement of the existing Affordable Care Act by the House of Representatives represents the first major overhaul in a list of proposed restructurings by Trump – the outcome of which will serve as an indicator for the possible timing and success of future policy initiatives.  Any postponement to the Healthcare reform is expected to prompt a sharp reversal of post-election trading trends with a further flight to safety.  Also of interest to global markets tomorrow will be speeches from several Fed members, including Janet Yellen’s keynote address at the Federal Reserve System Community Development Research conference.  Currently Treasury yields/swap rates are down 1-4 bps across the curve, pushing the yield on the 10-year note down below 2.39%.  Major US stock indices are currently mixed, with the DJIA down 0.2%, Nasdaq up 0.2%, and S&P 500 trading right around unchanged.  The US dollar is poised for a sixth consecutive session of declines, 0.2% lower against a basket of major currencies on the day.  Concerns over a crude oil supply glut heightened further after data showed an increase in US stockpiles, with both WTI and Brent crude falling roughly 0.5% to $48/barrel and $50.60/barrel, respectively.

Existing home sales data headlined a light day of meaningful economic reporting, with the number of resales during February falling from the previous month’s 10-year high level.  As released by the National Association of Realtors, existing home sales declined 3.7% last month to a seasonally adjusted pace of 5.48 million units.  The figure was slightly worse than forecasts of a 2.5% drop-off, as a shortage of inventory continues to drive up prices and keep some prospective buyers out of the market.  Compared to a year prior, resales climbed by 5.4% while the supply of available homes decreased 6.4%.  Additionally, the median home price jumped 7.7% from February 2016, tallying the 60th straight month of YoY gains.  

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