As markets digested implications of several fiscal policy changes over the past 2 months, a predictable trading pattern emerged. Stocks and interest rates moved lower together. This isn’t always the way things work, but it is typical during moments where investors are rapidly shedding risk and seeking safer havens. The pattern broke down last week, for a variety of mostly arcane reasons. This meant that rates moved sharply higher even as stocks continued to fall. Although it’s far too soon to declare victory against that volatility, we’re now seeing the bond market (the thing that dictates interest rate movement) act a bit more like its normal self. In other words, today’s data and events contributed to heavy stock losses, and bonds were willing to pick up enough of the slack for interest rates to move lower. This is the 3rd straight day of declines and it brings the conventional 30yr fixed rate back under 6.875% for the average top tier conventional loan.

“Every morning, I get hit by the same bicycle… It’s a vicious cycle.” Double meanings aside, seasons and the earth’s rotation are cyclical, and Anchorage is picking up nearly six minutes of sun a day. Did you know that the University of Alaska spans four time zones? (Zones are smaller up there.) The readership of this Commentary spans seven time zones across North America and into the Pacific, all of which have been abuzz with changes at FHFA, Fannie Mae, and Freddie Mac. It wasn’t that long ago that the “off with their heads” happened at Freddie Mac as the CEO, COO, and head of HR were fired, and Fannie’s board was changed by Bill Pulte. This month’s piece is titled, “Love Them or Leave Them? The Ongoing Saga of Fannie and Freddie.” (Today’s podcast can be found here and this week’s are sponsored by BeSmartee, transforming mortgage lending with Bright Connect, its native mobile app designed to boost loan officer productivity, speed up referrals, and simplify the borrower experience. Hear an interview with economist Elliot Eisenberg on the true impact of tariffs on industrialization and how people can cut through the noise in the news cycle to understand what is actually happening with both the economy and mortgage market.) Products, Software, and Services for Lenders Transform the way you manage your loans held for sale. By automating funding through loan sale, OptiFunder streamlines warehouse funding to boost efficiency, reduce risk, and increase profitability like never before. Managing $10 billion per day in loans held for sale for clients, OptiFunder has grown far beyond its beginnings as a warehouse line optimization tool. Today, its comprehensive warehouse management platforms are transforming how both originators and warehouse lenders operate. By connecting key third-party systems like LOS platforms, custodians, eVaults, fraud prevention tools, investors, and more, OptiFunder consolidates your processes into one seamless, scalable solution. Whether simplifying operations or improving efficiency, OptiFunder helps you stay competitive and build stronger relationships across the lending ecosystem. We’re not just optimizing anymore: We’re redefining warehouse management. Visit optifunder.com to learn more, or connect with us at upcoming events to see how we’re driving the future of warehouse lending.

What a difference a week makes. The present example has been entirely different than the previous example in terms of volatility and directional movement. To reiterate our overarching thesis, April 2nds staggering policy changes caused markets to go into a self-destruct sequence, thus leading to a policy pivot and a de-escalation of market turmoil. We’re now playing a slower game made possible by some measure of faith that the administration will respond to warnings in markets if those warnings become grave enough. Last week, we had rampant uncertainty and panic.  Now we just have rampant uncertainty.  Data remains less interesting than normal in the short term, but the Fed policy response is always notable. We’ll get an update from Powell this afternoon at 1:30pm ET which could help refine our understanding of how the Fed will balance tariff-driven inflation expectations versus the notion of cutting rates to offset tariff-driven economic softening. 

As tariff turbulence continues, BofA is predicting a slowdown, not a downturn. But America’s second-largest bank is also signaling that it’s prepared for a more severe scenario.

The deal has an extensive capital structure, which is expected to repay investors sequentially, with notes enhanced by subordination.

A bipartisan group of representatives co-sponsored the bill, aiming to make permanent and expand eligibility for a deduction previously offered for 14 years.

While no additional details were disclosed, the housing regulator’s inspector general typically probes cases which are prosecuted by the Department of Justice.

The agency is seeking input on how to better open up industries up to new entrants. Some see this opening the door to more competition for banks.

Absence Makes the Bonds Grow Stronger

Bonds improved at a moderate pace for the 2nd day in a row, thus marking the first sustained push back against the recent rate spike.  The gains are notable because they are not being driven by any big, new developments on the trade/tariff front. Instead, it is the absence of any such developments that is allowing the market to get back into a relatively calmer groove.  That said, we wouldn’t take the calm for granted.  Bonds have merely moved back to more nimble territory as we wait for more policy clarity.

Econ Data / Events

Import Prices

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Export Prices

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NY Fed Manufacturing

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Market Movement Recap

10:16 AM Choppy, sideways, but slightly stronger overnight.  MBS up 3 ticks (.09) and 10yr down about half a bp at 4.367

01:04 PM Gains continue.  MBS up a quarter point and 10yr down 5.5bps at 4.32

03:13 PM Down an eighth from the best levels of the day, but still up 5 ticks (.16). 10yr down 4bps at 4.333, but up a few bps from best levels. 

04:34 PM Avoiding further weakness this afternoon.  MBS up 5 ticks (.16) and 10yr down 4.4bps at 4.33

Financial markets experienced relatively extreme volatility on several occasions following the April 2nd tariff announcements. The bonds that underlie mortgage rates were no exception, thus pushing rates higher at one of the fastest weekly paces in years.  Things have been calmer so far this week, with the first two days looking more like a typical highly active trading day from before the tariff announcement.  Both the mortgage bonds and mortgage lenders appreciate lower volatility. It is especially appreciated at the moment because it is taking bonds back toward their previous range.   The average lender had already moved top tier 30yr fixed rates back under 7% yesterday. Today simply added to the momentum.   Despite the friendly move and the relative calm, this still isn’t an environment where it makes sense to take anything for granted in terms of today’s rates being available beyond the present day.