The Consumer Financial Protection Bureau and its union filed legal briefs Friday after a district court judge asked if a preliminary injunction aimed at preventing a mass layoff is still in effect.

Federal Reserve bank supervisors are monitoring community and regional banks’ commercial real estate portfolios amid concerns over “lower commercial property values,” the agency said.

Housing affordability will improve by 3% next year, according to First American’s September Real House Price Index.

Planet Home Lending, helped by growing recapture and distributed retail volume, did 64% more originations in the third quarter than one year prior.

Fortress has been one of the most active home equity investment firms in November, investing $1 billion in Cornerstone.

Complete Silence After AM Volatility

Bonds were mostly flat overnight before a sharp sell-off from 8am through 10am ET. After that, momentum went flat again–especially the last 4 hours of trading.  No one is still debating whether or not the AM sell-off was due to Japan’s central bank news or a post-holiday return to reality. Yields are back in the pre-Thanksgiving range and ready to respond to this week’s bigger-ticket econ reports.

Econ Data / Events

ISM Manufacturing Employment (Nov)

44.0 vs — f’cast, 46.0 prev

ISM Manufacturing PMI (Nov)

48.2 vs 48.6 f’cast, 48.7 prev

ISM Mfg Prices Paid (Nov)

58.5 vs 59.5 f’cast, 58.0 prev

Market Movement Recap

09:27 AM Mostly flat overnight but selling steadily since 8am.  MBS down a quarter point and 10yr up 6.9bps at 4.084

11:09 AM No reaction to ISM data.  Holding at weakest levels.  MBS down 9 ticks (.28) and 10yr up 7.6bps at 4.09

02:34 PM Steady at weakest levels. MBS still down 9 ticks (.28) and 10yr up 7.9bps at 4.093

A buddy from Kentucky wrote to me, saying, “Statistics show that the average person has sex 89 times per year. Looks like I’m in for a pretty wild December.” November is behind us, and with it all the noise about President Trump’s 50-year mortgage proposal. Capital markets personnel in the mortgage biz don’t like thinking about how long it would take to create a market for 50-year mortgages, nor do they like volatility, but traders do. The mood among traders has swiftly improved, chiefly due to economic data that has supported an interest rate cut in December. The Federal Reserve’s Open Market Committee doesn’t set mortgage rates, but the same factors that influence its decisions impact the bond market. A slow jobs market reduces the number of qualified borrowers but tends to lower rates. Pick your poison. Meanwhile, back office personnel are focused on making sure loans are manufactured correctly, and tomorrow’s STRATMOR session is all about data standards, AI guardrails, and the future of mortgage tech. At 2PM ET tune in as Sue Woodard, Garth Graham, and Brian Vieaux, the president of MISMO, discuss where the industry is headed and how thoughtful standards and collaboration can pave the way. (Today’s podcast can be found here and this week’s are sponsored by Two Dots, whose conversational screening agent replaces manual underwriting with a streamlined, end-to-end process that reduces risk and fraud while securing safer borrowers, increasing profitable loan volume, and lowering underwriting overhead. Today’s has an interview with United Home Loans President Mike Dulla on borrower sentiment and winning business in the current rate environment, automation with “humans in the loop,” and where lender executives are focused.)

Mortgage rates are based on bonds and the bond market is prone to erratic behavior on major holiday weeks. One of the more common patterns is for the holiday week to see a noticeable departure from a prevailing trend only to return to that trend in the following week.  That’s exactly what we’re seeing on the first day of the new week. The prevailing trend saw rates hold a narrow, sideways range with the average top tier 30yr fixed rate in the 6.3s.  Last week saw that average drop to 6.20% and now today, we’re right back up to 6.31%. [thirtyyearmortgagerates] In the coming days, economic data should have a bigger impact on rates than the sort serendipity at work today.

Bonds are sharply weaker to begin the new week and the new month. This is the first (and probably best) clue as to the nature of this morning’s market movement. Thanksgiving weeks are prone to random volatility and today’s selling basically erases the entirety of last week’s movement. Then there’s the Bank of Japan’s comments on considering rate hikes at the next meeting. Past examples of policy shifts in Japan are burned into the memory of US markets as the source of several large, surprising reactions in bonds. Today’s example is getting attention because there’s nothing more obvious to blame. And while it could be having an impact for some traders, it’s hard to confirm it’s the main source of weakness this morning.
If US bonds were obviously destined for pain over Japan, we would have expected stronger correlation with dollar/yen (USD/JPY) in the overnight session, but the selling didn’t really start until domestic hours. 

Contrast that to S&P futures, which had no problem moving with the Yen sell-off.

There’s been some suggestion that the Japanese influence was more of a domino effect that first played out in other bond markets.  But here too, overseas markets were moving while Treasuries were flat.

None of this is to say that the Japan news isn’t having an impact.  The simple fact that everyone’s talking about it ensures that at least some accounts are trading it. Perhaps this helps explain why the timing lines up with US traders waking up and reading the news.  Nonetheless, our favorite explanation is to take the entirety of last week’s volatility and throw it out.  In so doing, today’s levels seem right in line with the pre-Thanksgiving range. 

Perceived risk among lenders may result from a struggle to fully understand what the technology can and won’t do as advocates tout its efficiency and speed.