Everything’s relative when it comes to rates being high or low, but let’s agree that the past 2 years have relentlessly driven home the notion of an increasingly flat, narrow range that has perfectly orbited a 10yr yield around 4.34%. If that’s our reality, you know things have been pretty good when 3bps of gradual overnight selling leaves yields under 4.0%. As for underlying reasons, the move was so gradual that we don’t necessarily need any better explanation than the consolidation vibes discussed in yesterday’s recap.  But if you MUST have something to blame, oil prices are up again.

Economies and strategies impact various groups differently. Remember Mervyn’s, Montgomery Ward, or a dozen other large department stores that are no longer? Saks Fifth Avenue is now rumored to be potentially joining them. Residential lending is obviously impacted by the slowing economy: if you want lower rates, a government shutdown is one way to negatively impact the U.S. GDP. Interest rates were a topic at the MBA Annual, and thousands of lenders and vendors have headed home. (Nadia Evangelou, Senior Economist & Director of Real Estate Research at the NAR, is the guest on today’s Big Picture at noon PT.) Vendors, including Byte Software with its fabled baked goods, have packed up their booths. Next year it’s off to Chicago. Where will Freddie and Fannie will be then? The FHFA sent out a note saying that Bill Pulte is donating his salary to wounded veterans. It is a nice gesture, but prompted one reader to write, “Let’s say the FHFA Director makes $300k a year. Maybe a little more, maybe a little less. Bill Pulte is worth $100 million. If you invest $100 million at 3 percent per annum, the yearly income is $3,000,000, or $8,200 a day. Context is good.” (Today’s podcast can be found here and this week’s are sponsored by nCino, makers of the nCino Mortgage Suite for the modern mortgage lender. nCino Mortgage Suite’s three core products nCino Mortgage, nCino Incentive Compensation, and nCino Mortgage Analytics, unite the people, systems, and stages of the mortgage process into a seamless end-to-end solution embedded with data-driven insights and intelligent automation. Hear an interview Click n’ Close’s Ian Kimball on how originators prioritize strategic growth initiatives, operational execution, and go about market expansion.)

While the Federal Open Market Committee has yet to meet this month, investor pricing of longer-term bonds helped mortgages by 11 basis points, Wallethub said.

Forbearance or refinancing may help some, workarounds can keep many mainstream loans moving and one type of uncertainty does have an upside for rates.

In addition, John Roscoe and Brandon Hamara have been appointed co-presidents at the government-sponsored enterprise, effective immediately.

The Department of Justice has filed a motion opposing the Consumer Financial Protection Bureau employee union’s appeal of an August D.C. Circuit ruling allowing the administration to fire up to 90% of the agency’s workforce.

While purchase volume is up 20% from last year, it was 5% lower than one week ago, although a 4% increase in refinance activity helped pick up the slack.

“Why did the Tibetan Monks go to Las Vegas? They are very good at games of chants.” One topic among hallway chats with lenders here at the MBA Annual is keeping costs down. After all, everyone is selling, or putting their loans into portfolios, at roughly the same price, so whether a lender is doing $10 million a month or $1 billion a month, cost and efficiency are paramount. The current STRATMOR write up is titled, “Rates Drop, Pipelines Pop: Don’t Let Fulfillment Flop.” One of the simplest (I didn’t say easiest) ways to improve the cost per loan is ask your staff, “What are you trying to do to improve your pull through?” After all, higher pull through automatically lowers your cost per funded loan. And while IMB numbers are dropping, those remaining are carefully eyeing ARM, home equity, and non-Agency programs. (Today’s podcast can be found here and this week’s are sponsored by nCino, makers of the nCino Mortgage Suite for the modern mortgage lender. nCino Mortgage Suite’s three core products nCino Mortgage, nCino Incentive Compensation, and nCino Mortgage Analytics, unite the people, systems, and stages of the mortgage process into a seamless end-to-end solution embedded with data-driven insights and intelligent automation. Hear an Interview with Bradley’s Jonathan Kolodziej on the evolving enforcement of federal and state consumer financial laws and some lender best practices for adapting to changes in the regulatory environment.) Services, Products, Software, and Tools for Lenders and Brokers

Mortgage rates were perfectly unchanged today, on average.  With that, they remain in line with the lowest levels in more than a year and very close to the lowest levels in more than 3 years.  Recent momentum has been moderate and favorable. In the absence of big economic reports that are on hold due to the shutdown, bonds have taken cues from other developments like the new tariffs announced 2 weeks ago and the regional bank drama seen last week.  These market movers would normally be operating in the background–perhaps not even meriting discussion–but the dearth of data and the generally narrow range makes their effects more noticeable.  In thinking about the relatively uneventful return to long-term lows, it’s good to remember that momentum comes and goes when it comes to rates and the bond market that drives them.  Sometimes, a string of good luck is the only required catalyst for a token pull-back.  Bonds are showing some fatigue as 10yr yields have pushed just under 4.0%. It may take some more convincing in the form of data or other events to motivate additional improvement. 

20yr Treasury Auction to The Rescue

The day began with a bond market that looked like it might take an opportunity to retrace a small portion of the gains seen in recent days.  Even at its worst, it wasn’t that threatening (i.e. 10yr yields never rose above 3.98%). But any notion of a pull-back was effectively erased at 1pm with the results of the 20yr bond auction. Bids totaled 2.73 times the auction amount–right in line with the 6-auction average and the yield came in 1.3bps lower than expected. A 20yr auction wouldn’t normally be an obvious market mover, but the muted range and dearth of data made the reaction more noticeable. With that, bonds moved back into positive territory on the day and held steady through the 3pm close.

Econ Data / Events

Philly Fed Non-Manufacturing Biz Activity

-22.2 vs -12.3 prev
employment -4.5 vs +9.4 prev
new orders -17.4 vs +0.5 prev
prices 35.8 vs 38.8 prev

Market Movement Recap

10:33 AM Losing some ground after opening stronger.  MBS down 2 ticks (.06) and 10yr up 0.5bps at 3.974

01:52 PM Decent recovery after 20yr auction.  MBS up 1 tick (.03) and 10yr down 1.8bps at 3.952

03:33 PM Just off best levels.  MBS unchanged and 10yr down 1.5bps at 3.955