May 22, 2025 Headlines

The Treasury curve is twisting steeper with long-end yields 1-2 basis points (bps) higher and front-end yields 1-3 bps lower.

The House passed its version of the budget bill yesterday after adding steeper Medicaid and clean energy incentive cuts as well as an increased SALT cap to appease some Republican holdouts. According to the most recent jobless claims data, the labor market remains on solid footing, with initial claims falling 2,000 last week to 227,000.

Last night, President Trump posted on social media that he is “giving very serious consideration to bringing Fannie Mae and Freddie Mac public.” This is the first time Trump has commented publicly on the topic since 2021, when he penned a letter saying he would have privatized the GSEs during his first administration if he had the time to do so. The most recent comments come after the president worked with a group of House fiscal conservatives to get support for the budget bill that would further raise the deficit, and one likely motivation of this effort would be using the proceeds to offset some of the deficit impact of the tax bill. According to most industry experts, the process to do so could be lengthy and complicated, if done properly. This would involve shoring up capital reserves for each entity and reassuring markets of an implicit government backing for securities issued by the newly private entities. The latter could have a notable impact on mortgage-backed securities (MBS) spreads if not clear, which ultimately drives primary mortgage rates for consumers.

Jason Haley
Chief Investment Officer