Home prices rose 0.7% annually in March, down from a 0.8% increase in the previous month, according to the S&P Cotality Case-Shiller home price index.

Crude oil futures dropped sharply Sunday, triggering bullish Treasury gaps. The head of correspondent business development at AD Mortgage writes about what it means for yields.

Insurance claims dropped in 2025, but covered loss amounts didn’t follow, largely due to the severity of the Southern California wildfires, Rate reported.

Good Reminder That The Market Gets to Decide What Matters

If oil, Treasuries, stocks, and the rest of the market were completely closed, and if we could only estimate the probable impact of the news that’s been available over the past 3 days, it would be hard to make that case that bond yields should be any lower than they were on Friday. In fact, some of the newswires (the ones citing various military clashes) might lead one to suspect yields should be higher. But here we are with 10s down more than 6bps and MBS up almost half a point just after 3pm ET–a good reminder that the market gets to decide what to make of the available news.

Econ Data / Events

Philly Fed Non Manufacturing

-23.6 vs -13.0 f’cast

Chicago Fed Activity Index

.14 vs -.03

Market Movement Recap

08:43 AM Overnight peace optimism gains holding. MBS up half a point and 10yr down 8bps at 4.482

11:02 AM Off best levels. MBS up 3/8ths and 10yr down 5.6bps at 4.502

02:45 PM Modest recovery. MBS up 14 ticks (.44) and 10yr down 6.1bps at 4.498

The shift gathered pace at the most recent policy meeting in April, when three voters on the Federal Open Market Committee voted against the decision to hold rates steady.

The lender, in addressing claims first raised by the Consumer Financial Protection Bureau, said its activities are protected by safe harbor provisions.

Bonds Scratch Out a Win Amid Dueling Headlines

Bonds remain surprisingly willing to react to the most seemingly insignificant war-related headlines. Today it was the much-debated geographical location of Pakistan’s lead negotiator, Asim Munir, that set the tone. Bonds rallied on early accounts that he was en route to Tehran and pulled back when other headlines suggested he never left Pakistan. Ultimately, yields trickled just barely into positive territory by the end of the holiday-shortened session. Monday is fully closed for Memorial Day and we’re back to watching the news feed on Tuesday.

Econ Data / Events

CB Leading Index MoM (Apr)

0.1% vs -0.2% f’cast, -0.6% prev

Consumer Sentiment (May)

44.8 vs 48.2 f’cast, 49.8 prev

Sentiment: 1y Inflation (May)

4.8% vs 4.5% f’cast, 4.7% prev

Sentiment: 5y Inflation (May)

3.9% vs 3.4% f’cast, 3.5% prev

U Mich conditions (May)

45.8 vs 47.9 f’cast, 52.5 prev

Market Movement Recap

08:41 AM Modestly stronger overnight with some additional gains after early peace talk headlines. MBS up an eighth and 10yr down 2.2bps at 4.547

10:09 AM MBS now up only 1 tick (.03) and down 7 ticks (.22) from the AM highs. 10yr up 0.4bps at 4.572 after briefly trading below 4.53.

12:48 PM After being down almost an eighth, MBS are back to being up 1 tick (.03) and 10yr yields back to unchanged after being about 1bp higher.

Mortgage lenders rely on the bond market to generate mortgage rates. In addition to being fully closed on Monday for Memorial Day, bonds also close 3 hours earlier than normal on the preceding Friday (i.e. today). The abbreviated trading session was fairly uneventful for rates despite some back-and-forth volatility in response to diplomacy headlines surrounding Iran/US peace negotiations. The flow of news resulted in better bond market levels early in the day and a pull-back in the late AM hours. After accounting for some lenders’ mid-day rate changes, the average lender ended the day right in line with yesterday’s levels which were also incidentally right in line with last Friday’s levels. 

Residential construction activity was mixed again in April, as building permits rebounded while housing starts pulled back modestly from March’s stronger pace. The latest Census Bureau data continues to reflect a construction sector navigating uneven demand and affordability pressures. Privately owned housing starts fell 2.8% to a seasonally adjusted annual rate of 1.465 million , down from March’s revised 1.507 million pace. Despite the monthly decline, starts were still 4.6% higher than April 2025 levels. Single-family starts dropped 9.0% to 930k, while multifamily starts (buildings with five units or more) increased to 529k. On the permitting side, activity recovered after March’s sharp decline. Total building permits rose 5.8% to an annual rate of 1.442 million , though that was still 0.2% below year-ago levels. Single-family permits declined 2.6% to 872k, while multifamily authorizations climbed to 514k. As is often the case with this data series, month-to-month swings can exaggerate the underlying trend. More broadly, residential construction activity has remained relatively stable over the past year, with builders continuing to balance elevated financing costs, affordability challenges, and uneven buyer demand. In fact, if we smooth the data with a simple 3-month moving average, it’s easier to see a decent little rebound from the long term lows last Fall. In this light, housing starts are the strongest they’ve been since early 2024.

Mortgage applications pulled back last week as rising rates weighed on homebuyer demand, while refinance activity remained largely flat. The Mortgage Bankers Association (MBA) reported a 2.3% decrease in total application volume on a seasonally adjusted basis for the week ending May 15. The decline was driven primarily by softer purchase activity. The seasonally adjusted Purchase Index fell 4% from the prior week, though purchase demand remained 8% higher than the same week one year ago. Refinance activity was mostly unchanged despite the rise in rates. The Refinance Index dipped just 0.1% week over week but remained 35% above year-ago levels. The average 30-year fixed mortgage rate increased to 6.56% from 6.46%, reaching its highest level in seven weeks. According to MBA, concerns surrounding inflation, higher fuel costs, and growing worries over global public debt helped push Treasury yields — and mortgage rates — higher during the week. MBA’s Joel Kan said, ” Overall applications were down to the lowest level in five weeks as purchase borrowers pulled back across conventional and government loan types. Refinance applications were essentially unchanged, with a decline in government refinances and an increase in conventional refinancing, likely as the increase in rates came late in the week. ” Kan also noted that adjustable-rate mortgages gained traction as borrowers looked for lower-rate alternatives. ARM loans accounted for nearly 10% of total applications, the highest share since October 2025, with the average ARM rate sitting roughly 80 basis points below the 30-year fixed rate.