IRAN: CENTCOM WARNS IT WILL STRIKE MINE-LAYING SHIPS IN SELF-DEFENSE

• MBA composite mortgage applications fell -1.6% (sa) last week after a solid 7.9% increase the week prior.
• However, new purchase applications held up better than refis again in somewhat more encouraging signs for housing market activity.
• New purchase applications increased 1.2% after a strong 10.1% the week prior (fresh high since Jan 23 week) whilst refis dipped -4.4% after 5.8%.
• Levels relative to 2019 average: composite 62%, new purchases 69% and refis 56%.
• 30Y mortgage rates only ticked up 2bp to 6.37% last week. They compare to a pre-Iran war low of 6.09% in February (lowest since Sep 2022) and an Iran war high of 6.57% in late March (highest since Aug 2025).
• Mortgage spreads were relatively steady on the week after recently paring some of the sharp widening in March. The spread of average 30Y rates over average 10Y Tsy yields sits at 208bp (cycle low of 197bps in early Feb, hit 220bp late March) whist the spread to the average 10Y swap rate sits at 252bps (cycle low of 233bp in Jan, hit 266bp in late March).

Following today's BOC meeting, TD Securities is removing one 25bp hike from of its expected BOC rate path, seeing just 2 raises in 2027 (vs 3 previously) an overnight rate of 2.75%. 

• "Our view for a 3.00% terminal rate was predicated on the Bank revising its neutral range higher to build on the 25bp moves in 2022 and 2024; we had been looking for this to materialize in the April 2025 MPR, but with the Bank's decision to reaffirm a 2.25-3.25% range in 2026 we no longer see a compelling case for the Bank to deliver a third hike in 2027. The Bank could still revise neutral higher at this time next year, but we believe policy normalization will be well underway by that point. That is why it would have been cleaner to make the change in today's policy decision, even with all the geopolitical uncertainty."
• On the rest of today's meeting communications: "The communique had a cautious tone, with the Bank downplaying positive growth impacts from higher energy prices and paying special attention to trade uncertainty and a soft labour market. Despite the Bank's apparent caution, growth forecasts for 2026 were nonetheless revised modestly higher, and in that sense to communique looks like it was implicitly designed to push back against hawkish expectations" though TD also notes a "hawkish tone in the presser".

Large 2Y sale contributing to the latest decline:

• -11,780 TUM6 103-17.5, sell through 103-16.62 post time bid at 1146:58ET, DV01 $493,000.
• The 2Y contract trades 103-17.25 last (-3.38).