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Registered Investment Adviser Caleb Lawrence 

More trade war rhetoric and a marked escalation in the Washington DC witch hunt sends the major averages into the final hour about even.

Yesterday’s Treasury International Capital flows or TIC report showed that foreigners remained more than willing to finance our deficits in February with 49 billion in net purchases. Treasury Notes and Bonds had their best showing in quite some time followed by Agency Bonds and to a lesser extent Corporate Bonds, Equites saw small net sales for the month. Will see what the consensus is going forward in the post trade war rhetoric period.

The MBA or Mortgage Bankers Association reports that mortgage activity advanced 4.9% last week, refi’s gained 3.5% while purchase apps jumped 6.1%. The 30-year contract rate for a jumbo loan was unchanged at 4.53%.

The Fed’s Beige Book on regional economic activity showed essentially more of the same, moderate economic growth. Considerable concerns were noted with respect to tariffs and trade wars.

With trade wars dominating the headlines it’s easy to forget about important things like the yield curve. After stabilizing at the beginning of the year it has resumed its compression during the second quarter. The previous two recessions each saw a yield curve inversion about a year before they got underway. This compression will give the Fed much to think about before raising interest rates again as increasing the short end of the curve will lead to more compression for the series that is dangerously close to inverting.

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