The government-sponsored enterprises’ oversight chief severed ties with the AI firm following President Trump’s dispute with it over boundaries on military use.

In the initial aftermath of the conflict, the 10-year Treasury rose by 10 basis points over a two-day period, pushing mortgage rates back above the 6% level.

Applications for renovation financing in 2024 were more abundant in some of the nation’s smaller counties and states, than in the largest housing markets.

The housing supply gap hit an estimated 4.03 million, an increase from 3.8 million in 2024, as new construction fell short again, according to Realtor.com.

Mutual of Omaha, Finance of America and Longbridge Financial rank at the top of HECM endorsements over the past 12 months, Reverse Market Insight reported.

Bonds Erase Most of The AM Losses

The bond market was visibly pulled in two directions on Tuesday. This played out in phases, with AM weakness followed by a gradual recovery. But it can also be assumed to be playing out at any given moment as bonds listen to the voices arguing in their own mind. One voice says yields need to go higher due to inflation expectations and Treasury issuance implications.  The other says that Treasuries are still a global safe haven amid geopolitical uncertainty (and, to a lesser extent, that the sell-off through 9am this morning may have been a tad overdone).  Looking at stocks vs bonds, it does indeed look like yesterday was more about inflation fears and new-month positioning while today was a risk-off move that started at the 9:30am NYSE open. 

Market Movement Recap

08:48 AM Another overnight session with heavy selling. 10yr up 6.4bps at 4.099 and MBS down 9 ticks (.28).

10:58 AM decent recovery in 10am hour. MBS down less than a quarter point now and 10yr up only 3.3bps at 4.069

01:39 PM Recovery continues. MBS down only an eighth and 10yr up 1.6bps at 4.052

04:13 PM Off best levels heading into the close. MBS down 5 ticks (.16) and 10yr up 2.6bps at 4.062

After spending the entirety of last week calmy holding the lowest levels in more than 3 years, mortgage rates jumped sharply higher yesterday. That said, everything’s relative. Even after that “sharp” increase, the average rate was still one of the lowest in years apart from last week. There was slightly more cause for concern this morning as the underlying bond market increasingly swooned.  When bonds lost ground, rates move higher.  But unlike yesterday, which involved pervasive gradual weakness throughout, today saw a meaningful recovery shortly after the market opened. Bonds ended up making it almost all the way back to ‘unchanged,’ thus allowing most lenders to reissue revised rates that were slightly lower than this morning. The average lender didn’t make it quite back to yesterday’s latest levels, but the market movement offered an important proof of concept. Specifically, we’re not necessarily destined to see a runaway rate spike in the coming days. As always, there’s an important caveat: we’re not necessarily destined to see anything at all when it comes to the future of rate movement.  Depending on the outcome of economic data, rates could continue higher or recover back toward recent lows. Geopolitical developments can continue adding volatility for better or worse.  If there’s one take away, it’s simply that volatility risks are much more pronounced this week compared to the past 2 weeks. 

At the L1 Summit, technology is obviously a key segment of many sessions. Tech is helping larger companies in their moves in controlling the borrower funnel. Artificial intelligence (AI) with its pros and cons but hoped-for benefits to productivity and therefore cost reduction, is a common conversation topic. Third party provider offerings are also theme. especially when it comes to technology and marketing. “Rob, I know that you have job ads in your Commentary, but we’re looking for a CRM that works well with lenders. Can you recommend someone?” In our Marketplace we have Total Expert, Volly, Insellerate, Usherpa, MortgageHalo, OptifiNow. Data mining is not new. Trivia experts know that many years ago there was a conspiracy belief that Baskin-Robbins, which recently turned 80 and gives away a free scoop to people on the BR birthday list celebrating their birthday, sold its birthday list to the U.S. Government’s selective service for draft purposes. That was not true. Many decades ago the Selective Service did, however, use Farrell’s birthday list which, when this was found out, quickly came to an end. (Today’s podcast can be found here and this week’s ‘casts are sponsored by Feewise, which turns mortgage compliance from bottleneck to business accelerator. Handle all the complexities involved with establishing TRID compliant fees and disclosures, achieve sign off, and deliver packages to your consumers for review or signature. Hear an interview with ACES Quality Management’s Sharon Reichhardt on improving productivity and mortgage loan quality while controlling costs and risk.)

Bonds sold off again overnight with 10yr yields now challenging the 4.10% technical level in early trading. MBS are down another 3/8ths, roughly. And there’s stronger correlation with higher oil prices and rising bond yields. So in light of our contrarian take yesterday, are we now forced to acquiesce to the “higher inflation/higher rates” narrative?  Not entirely. While there’s no doubt that a certain contingent of smaller traders are drawing that conclusion, and while there’s better evidence for it in some of today’s charts, there remains a problematic reality in an even simpler chart. There’s a tradeable security that measures market-based inflation expectations and it has shown almost no uptick in the past 2 days.

Smart analysts are calling out this oddity. Unfortunately, it doesn’t do anything to help us explain the scope of the sell-off, but we strongly suspect Treasury issuance implications are a factor as they relate to military spending.  Lastly, if we look at shorter-term TIPS, we can see slightly more inflation concern, but not enough to say “this is the main reason bonds are selling.” That has us thinking about things like issuance implications from increased military spending.

Here are the charts showing how yesterday’s correlations have reversed course today for stocks/bonds and oil/bonds. 

Last but not least, this chart shows today’s much more noticeable uptick in the implied Fed Funds Rate for the June meeting. In other words, rate cut odds evaporated more quickly today (although they have bounced back a bit since 6:30am ET).

The Supreme Court’s decision seems to set limits on Pres. Trump’s power, even if he wasn’t inclined to hold on to the GSEs to control mortgage rates, BTIG said.