Bonds yields are higher in response to continued positive trading in the U.S. stock market with all major indexes at record and or above record levels. Also, the announcement by Trump of “big league” tax reform juiced the equity markets yesterday and resulted in a sell-off in bonds which continued into today. If Wall Street responds positively to Trump’s tax policies when announced in a couple of weeks, then interest rates will rise. We have yet to see how effectively the Trump administration will implement new tax policies. However, the stock market continues to trade positively in response to Trump’s stated economic policies at the expense of bonds.

Given that rates are still very attractive, and banks’ loan origination volumes are slow, which typically results in tighter profit margin on loans, we remain biased to locking in interest rates at these levels.