Short and middle end of curve expanded while long rates fell yesterday. Move happened possibly due to two things: improving unemployment claims data and Trump ordering $200 billion buyback of mortgage-backed securities to promote home ownership in US through Fannie Mae and Freddie Mac. Extra demand for MBS should, in theory, compress MBS spreads to Treasuries, lowering yield investors demand on mortgage bonds and thereby nudging primary mortgage rates down. Move conceptually similar to Fed’s QE in MBS during and after 2008 and 2020, but this time driven by housing agencies/executive branch rather than central bank. However, effect somewhat muted as Fed continues rolling off its MBS—proper liquidity bazooka would involve Fed demand stepping up too, but inflation concerns may prevent this.
Massive military expansion: Trump proposed lifting total US military spending to $1.5 trillion in FY 2027, roughly 50-60% jump from roughly $900 billion defense budget just passed for FY 2026, to build “dream military” in response to “troubled and dangerous times.” FY 2026 NDAA already authorizes: $26B shipbuilding (Columbia/Virginia subs, DDG-51 destroyers, Ford-class carrier, auxiliaries), $38B aircraft (fighters, bombers, tankers, rotorcraft, unmanned systems), $4B ground vehicles, $25B munitions (GMLRS, Javelin, Stinger, Tomahawk, AMRAAM, LRASM, JDAM, etc.). $1.5T top-line implies significantly larger procurement accounts: more ships/subs to counter China, expanded long-range strike and missile defense, high-volume munitions stockpiles for simultaneous conflicts.
Key Levels: Support at 6,785.10 | Resistance at 6,987.0
Investor Takeaway: RSI at 51 above MA line with fading MACD buying momentum; $200B MBS buyback and $1.5T military budget create dual fiscal stimulus despite Fed MBS rolloff limiting housing impact—defense contractors major beneficiaries.
