“Rob, we’ve said ‘no’ to more expansion possibilities than ever before. Are you hearing other lenders doing deep dives on LOs and branches and also not seeing a profitable path?” Yes indeedy. Here in Jackson, MS, at the Mississippi Mortgage Banker’s Fall Conference, lenders are not only discussing expansion but also early payoff penalties and strategies to avoid them. (Of course, they are explaining to newer entrants why few investors would ever pay 102 or 104 for a loan that may pay off soon at 100.) One topic is why companies service, or sell service, and this month’s STRATMOR piece is titled, “Servicing: What’s All the Fuss About?” Another topic on lenders’ minds are demographics, income, and reasons for moving, and now we have government news that income inequality has dipped and fewer people moved, per the largest survey of U.S. life. Talk to any solid loan originator, and they’ll tell you that the top three attributes of their brethren are focus, leadership, and consistency. (Today’s podcast can be found here and this week’s are sponsored by Indecomm. Streamlining operations with the genius blend of automation, AI, and services. Achieve practical digital transformation and real operational impact with Indecomm’s purpose-built mortgage solutions. Hear an interview with Polunsky Beitel Green’s Peter Idziak on takeaways from the bipartisan Home Buyers Privacy Protection Act (trigger leads bill), which amends the Fair Credit Reporting Act by shifting trigger leads to an opt-in system, mandates a study on text-based solicitations, and raises concerns about its impact on credit bureau revenue and market competition.)

Bonds began the week with 10yr at 4.07 before rallying down to 4.04 by Monday’s close.  Now on Friday, we’re opening at 4.06 and we haven’t spent much time trading more than a few bps higher or lower than that for the entire week.  Translation: apart from yesterday’s attempt to challenge the 4.0% floor, it’s been very sideways and uneventful. On the topic of the 4.0% floor, market technicians might be reading some significance into the repeated bounces yesterday amid higher volumes.  But one need not be a technician to reconcile the mixed econ data and broad uncertainty with an unwillingness to push an already well-developed post-NFP rally.  Bonds will wait for the dot plot before considering the possibility of a true range departure (barring unforeseen shocks, as always).

In other news, MBS are outperforming due to dynamics surrounding “the roll” (monthly settlement process that brings a new coupon to the forefront). The chart makes it look like MBS are lower so far today, but when comparing October delivery coupons to themselves, MBS are actually flat instead of weaker (the 2-day chart shows October coupons today and September coupons yesterday).

Opendoor Technologies Inc. shares surged by as much as 69% Thursday after announcing the return of its co-founders to the board and a new chief executive officer.

Properties with default notices, scheduled auctions and REOs are up by double digits compared to last summer as buyers are mired in a high-cost environment.

The Consumer Financial Protection Bureau has notified employees of an upcoming reduction in force after its budget was cut in half by the president’s recently passed tax and budget bill.

The opening trades were at $11 higher than what Figure priced the initial public offering, and in early action, the stock has ranged from $32 to $37 per share.

The 30-year fixed rate mortgage had its largest decline in a year as it is universally anticipated the Federal Open Market Committee will cut short-term rates.

Very Calm Reaction But Not Too Surprising

One could argue that CPI is the next biggest potential market mover after the jobs report. With that in mind, it might seem surprising that MBS are heading out the door roughly unchanged and 10yr yields are down less than 3bps. It becomes less surprising when we consider inflation was mostly in line with expectations. Elevated unrounded core numbers were offset by decent drop in supercore (services excluding energy and shelter). When it comes to this morning’s initial rally, we’d give more credit to supercore than we would to the pop in Jobless Claims, but both probably played a role. Either way, all today’s CPI really needed to do was stay out of the way of rate cut signals in the last jobs report, and it generally did.

Econ Data / Events

Continued Claims (Aug)/30

1,939K vs 1950K f’cast, 1940K prev

Continued Claims (Aug)/30

1,939K vs 1950K f’cast, 1940K prev

Jobless Claims (Sep)/06

263K vs 235K f’cast, 237K prev

Jobless Claims (Sep)/06

263K vs 235K f’cast, 237K prev

m/m CORE CPI (Aug)

0.3% vs 0.3% f’cast, 0.3% prev

m/m CORE CPI (Aug)

0.3% vs 0.3% f’cast, 0.3% prev

m/m Headline CPI (Aug)

0.4% vs 0.3% f’cast, 0.2% prev

m/m Headline CPI (Aug)

0.4% vs 0.3% f’cast, 0.2% prev

y/y CORE CPI (Aug)

3.1% vs 3.1% f’cast, 3.1% prev

y/y CORE CPI (Aug)

3.1% vs 3.1% f’cast, 3.1% prev

y/y Headline CPI (Aug)

2.9% vs 2.9% f’cast, 2.7% prev

y/y Headline CPI (Aug)

2.9% vs 2.9% f’cast, 2.7% prev

Market Movement Recap

08:46 AM Initially stronger after data, but pulling back a bit.  MBS roughly unchanged and 10yr down 1.7bps at 4.032

02:03 PM Holding modest gains.  MBS up 2 ticks (.06) and 10yr down 3.2bps at 4.017

04:05 PM Fairly flat, but near weaker levels of the past few hours. MBS up only 1 tick (.03) and 10yr down 2.9bps at 4.02

Today’s inflation report (the Consumer Price Index or CPI) certainly had a chance to create volatility for rates, but things ended up staying fairly calm.  There are multiple subheadings of data that the bond market cares about when it come to CPI. Most of them were in line with expectations, or close enough to avoid surprising investors. The absence of surprise gave way to some improvement in bonds which, in turn, allowed mortgage lenders to start the day at just slightly lower levels.  Additionally, a higher reading in this morning’s weekly jobless claims report may have helped. Officially, the top tier 30yr fixed rate at the average lender just barely scratched out a new 11-month low, but most borrowers would see little–if any–difference compared to the past 4 days.

It’s an interesting morning for economic data and the bond market’s reaction.  At face value, CPI was mostly in line with forecasts, but unrounded numbers were a bit hot (i.e. core monthly CPI was 0.346%, almost high enough to make for a 0.4 vs 0.3 reading). Additionally, monthly headline inflation was 0.4 vs 0.3. These numbers, in and of themselves, wouldn’t seem to suggest a bond rally.  At the same moment, Jobless Claims printed at 263k vs a 235k forecast–the highest reading since 2021. The initial conclusion is that there is enough labor market concern to offset still-elevated inflation, but a drop in supercore inflation (excludes food/energy/housing) may be the bigger factor.  Last month’s supercore, per Bloomberg, was 0.481.  This month, it fell to 0.330. This basically means inflation is standing aside and allowing the Fed to focus on the weaker labor market–a conclusion that’s far more informed by the last jobs report than today’s jobless claims.