This week is ending with the average top tier 30yr fixed mortgage rate at its lowest level since early October, 2024. The only way to be disappointed about that would be to focus on the fact that rates were even lower this morning. Rates fell sharply due to the market’s ongoing reaction to Wednesday’s tariff announcement and especially due to China’s announcement of retaliatory tariffs overnight.  Bonds (which dictate rates) were at their strongest levels right at the start of domestic trading, but progressively erased gains.  Why? There are several ways to make a case for Friday’s rate reversal. These include but are not limited to 3 key events:
A reasonably strong jobs report
News that Vietnam would lower tariffs on the U.S. (which acted as a proof of concept suggesting tariffs could end up being less onerous than feared)
Fed Chair Powell expressing renewed concern over the inflationary impact of tariffs as opposed to offering any indication that the Fed would be eager to cut rates in response to economic turmoil
In addition to those actual nuts and bolts, one could also consider that rates quite simply covered a ton of ground this week, relative to their recent tendencies, and it’s not unheard of for traders to circle the wagons on a Friday afternoon (i.e. to push back slightly on the prevailing momentum). Again, the average rate is still as low as it’s been since October. If there’s anything to be less than enthusiastic about, it’s the fact that the nature of this motivation means that volatility remains a distinct risk, for better or worse.

Despite today being “jobs report Friday,” and despite the jobs report perennially having the power to cause big volatility for financial markets, overnight developments proved to be far more consequential.  Specifically, China’s announcement of retaliatory tariffs send stocks and bond yields into a swan dive at 6am ET.  The stronger jobs report ended up having very little impact by comparison.  Even now, trade headlines regarding Trump’s call with Vietnam are doing more to move markets than econ data. Bonds are still stronger, but not as strong as they were in the early morning hours. 

Despite the push-back.  Bigger picture still looks good.

While prices are still rising, an increase in reductions from listing suggests sellers are adjusting to the new reality for home buying this season.

The systematic miscalculations diverted thousands of dollars from people who fell behind on loans, said documents filed in federal court in Brooklyn.

Lumber retains protections for now, but construction stocks still fell, and while the initial market reaction lowered rates, there could later be a reversal.

The bank said it will appeal the judge’s ruling, which it suggested would have a chilling effect on lenders participating in such government programs.

Homebuyers would be able to take advantage of streamlined finance options, folding energy infrastructure costs with their mortgages, the companies said.

The Chinese curse, “May you live in interesting times” can easily be applied to the residential mortgage business in the last month or so. This week and yesterday was no exception, with some brokers benefitting from both Trump’s tariffs (fully expected to slow the economy, driving rates lower) and United Wholesale trying to keep its market share while Rocket Companies is spending about $11 billion to cement its place in real estate transactions and be in touch with a potential borrower from shopping for a home all the way to servicing it. (More below.) Meanwhile, just in time for the MBA’s Advocacy event next week in Washington, DC, House Republicans, led by Rep. French Hill, R-Ark., have sent letters to top US financial regulators urging them to reverse several Biden-era banking rules. Their priorities include rescinding the revamped Community Reinvestment Act (CRA), rolling back CFPB rules on overdraft fees and medical debt, and pausing Basel III reforms. The lawmakers said recent regulations have hurt innovation and access to financial services, especially for families and small businesses. (Today’s podcast can be found here and this week’s is sponsored by Calque. Calque provides a binding backup offer on your borrower’s departing residence to clear the existing mortgage balance and closing costs in 48 business hours or less. Today’s features an interview with Waymaker Mortgage’s Scottie Campbell and Revest Loans’ Jim Black on how buy-before-you-sell loan products are helping drive up origination volumes.)

Yesterday afternoon’s tariff announcement sent financial markets on a ride that ultimately resulted in sharply lower stock prices and moderately lower bond yields. Stocks don’t always correlate with bond yields, but that has been a common pattern since late February. The correlation between bond yields and mortgage rates, on the other hand, is perpetual and nearly flawless. After all, “yield” is just another word for “rate.”  Additionally, mortgage rates are based on mortgage-backed securities (MBS) which are basically bonds.  All that to say: rates have been benefitting from the market chaos that’s been hurting stocks, and stocks got hurt quite a bit over the past 24 hours.  Considering the average 30yr fixed rate was already close to its lowest levels since mid October yesterday, it’s no surprise to see an official breakout today. [thirtyyearmortgagerates] Tariffs and stock market volatility are not the only games in town for rates. Economic data is also very important and tomorrow’s jobs report is typically the most important economic report of any given month. Depending on the results, it could help rates move even lower or bounce back up into the recent range. 

Big, Early Rally, Then Flat All Day

On any given day in the bond market, Sometimes everything that’s going to happen ends up happening in the morning, thus leaving the rest of the day to drift almost perfectly sideways. Thursday was one of those days. Overseas markets dogpiled on Wednesday afternoon’s tariff reaction, sending stocks ripping lower and bond yields following. By the time US markets began active trading, most of the gains were in for bonds.  MBS, specifically, barely budged from 11:40am through the close.

Econ Data / Events

Jobless Claims

219k vs 225k f’cast, 225k prev

Continued Claims

1.903m vs 1.860m f’cast, 1.847m prev

ISM Services

50.8 vs 53.0 f’cast, 53.5 prev

ISM Employment

46.2 vs 53.9 prev

ISM Prices

60.9 vs 62.6 prev

Market Movement Recap

08:35 AM Stronger overnight as tariff rally extends.  MBS up a quarter point and 10yr down 8bps at 4.044

01:01 PM Sideways near highs.  MBS up 9 ticks (.28) and 01yr down 7.5bps at 4.048

04:17 PM Still sideways!  MBS up 10 ticks (.31) and 10yr down 8.3bps at 4.041