In a forum Tuesday, Senate Democrats railed against President Trump and Elon Musk’s efforts to shutter the Consumer Financial Protection Bureau as anti-consumer and illegal.

“Red flags are emerging for the US economy,” said Elias Haddad, senior market strategist at Brown Brothers Harriman. “Another month or two of poor US economic data would deliver a blow to the US exceptionalism narrative.”

Texas Capital is arguing against summary judgment, saying prior assertions about reverse mortgages’ initial and subsequent draws need to be examined in court.

The Justice Department said in a legal brief that the Consumer Financial Protection Bureau will continue to exist, but said instead that the agency will have fewer employees and a reduced budget under the Trump administration.

Recent housing trends more favorable to buyers will ease some of the pressure for higher down payments in order to secure a winning bid, Redfin finds.

Impressively Calm Rally Continues Amid General Growth Concerns

In the absence of the typical motivations required for the present pace of bond market gains, we’re left to ponder vague generalities such as the famous “global growth concerns” that were such a fixture in 2015 and 2019.  Some traders are citing such things as a reason to fade stocks and buy bonds at the moment, but those motivations will only last as long as the data allows.  In other words, we’re seeing a bit of a lead-off ahead of the next round of big-ticket data, but if that data is surprisingly strong, rates could easily snap back. Conversely, if the data confirms the wisdom of the lead-off, there’s more room to improve despite seemingly overbought technicals. 

Econ Data / Events

Consumer Confidence

98.3 vs 102.5 f’cast, 104.1 prev
Biggest 1 month drop since August 2021

Market Movement Recap

10:53 AM Sharply stronger overnight and continuing to rally.  MBS up 3/8ths and 10yr down 11bps at 4.297

12:03 PM Down an eighth from highs, but MBS still up 9 ticks (.28) on the day.  10yr still down 9.8bps at 4.309, but up from lows of 4.286

02:25 PM Bouncing back a bit in the PM hours.  MBS up almost 3/8ths and 10yr down 10.4bps at 4.303

Over the past 4 business days, the average top tier mortgage rate has fallen by 0.22%. While that may seem like a small number, consider that mortgage rates haven’t moved half as much in either direction for the entire month up until this point. Looked at another way, the last time rates moved down this much, it took more than 3 weeks. While there are examples of rates dropping faster, the point is that the current pace is relatively rare. It’s made all the more interesting by the absence of what we would consider to be top tier motivations.  Such motivations typically include things like the jobs report, other key economic reports, major geopolitical events, or big policy revelations from the Federal Reserve.  The current example definitely draws on some downbeat economic data for inspiration, but not from reports that are usually responsible for this type of movement.  Additionally, the underlying bond market has continued to improve at a steady pace at times of day that suggest motivations beyond the economic reports. Long story short, bonds are in fashion at the moment.  When traders buy more bonds, rates move lower, all other things being equal. The broadest and most common explanations have to do with expectations for a downshift in global economic growth in response to domestic tariffs and cost-cutting efforts.  That topic is a can of worms in terms of complexity and counterpoints, to be sure.  Fortunately, it will either be confirmed or rejected by economic data in the coming months.  There’s more room for improvement if the data is weak and inflation is lower than expected.  Conversely, if it’s merely “vibes” driving the present bond buying spree and the data sings a different tune, there’s plenty of room for rates to bounce back up.

In Connecticut, a portion of the formal and informal talk here is about how builder news touches on lenders. (As an aside, Home Depot’s earnings, reported this morning, are solid.) Plenty of building materials come from Canada and Mexico, and the letter from the National Association of Homebuilders (NAHB) to President Trump asking for tariff exemptions on building materials caught people’s attention. But overall, builders seem to be doing just fine… Why should builders be in a rush to build more homes? Bill Pulte, part of the builder family, has been nominated to run the FHFA, conservator for Freddie & Fannie. PulteGroup grew closings by 9% and home sales revenue by 11% during a record-setting fiscal 2024. For the full year, the home builder generated home sales revenue of $17.3 billion, home closings of 31,219, and profit of $3.1 billion, or $14.69 per share. Drees Homes, the No. 41 company on the 2024 Builder 100 list, is acquiring the assets of San Antonio-based Monticello Homes. The acquisition grows Drees’ portfolio to 11 metropolitan areas nationwide, including the four major Texas markets. Empire Communities, the No. 56 company on the 2024 Builder 100 list, has expanded its presence in the Carolinas through the acquisition of Charlotte-based SouthCraft Home Builders. (Today’s podcast can be found here and this week’s is sponsored by Sagent. Sagent brings the modern experience customers now expect from loan originations to loan servicing, where lifetime customer relationships are managed and grown. Hear an interview with Sagent’s Omer Farooque and Perry Hilzendeger on key milestones one year after the launch of Dara, AI-driven innovations, real-time data solutions, and how their cutting-edge servicing technology is reshaping the mortgage industry.)

They day begins with 10yr yields down more than 10bps and trading under 4.30% at times. MBS are up 3/8ths with 5.5 UMBS coupons getting close to par.  All of this transpired without any big-ticket data or scheduled events. In other words, despite a few mini-gluts of bond buying, the move has been relatively linear today.  One of the gluts coincided with the EU open, which is not uncommon in overnight trading.  Same story with the 8:20am CME open and the 9:30am NYSE open.

Some might also say that lower energy prices bode well for inflation. Others might say that the correction seen in crude oil is just another way the market is expressing concern over the pace of global growth.

There isn’t too much to glean from the timing apart from a simple reinforcement of the broad-based buying sentiment. So what’s driving the sentiment? The best guesses among traders and analysts involve a few usual suspects including but not limited to the potential economic impact of new fiscal austerity at home, the global economic impact from tariff/trade policy, the labor force implications (both due to tariff/trade policies, government lay-offs, and immigration policy), and lastly, corporate updates on hiring/firing/earnings.

The confabs are a sign that Republicans are getting serious about negotiating the contours of a tax deal, even as the House and Senate are pursuing separate strategies.