Franklin Credit Management Corp. agreed to pay $300,000 to Massachusetts and not sell its portfolio of state loans to a different servicer.

Chief capital markets officer William Chang is stepping down “to explore new opportunities within the mortgage banking sector.”

writes the Senior Economist for LendingTree

The conforming 30-year fixed rate mortgage rose to 6.12% on Oct. 3.

Tis the time of year when pumpkins have magically appeared in bins outside supermarkets and on porches. Which state grows the most? It’s hard to beat Illinois with its 18,000 acres of pumpkins. 2,100 miles away, in California (with roughly 900,000 acres of grapes), what happens when a family with a vineyard tries to do a tiny bit to help the housing/shelter market? In California, it isn’t pretty: Decent people, not criminals… They should have painted it camouflage. In addition to the terrible personal toll, wide swaths of housing are wiped out by fire (Maui) and now Helene, impacting supply and demand. Whether it is trends in residences, income, or credit analysis, things change. Do the Agency guidelines fit the current trends in income? Arguably not. (Capital markets staffs certainly can’t hedge GSE changes to gfees.) What about non-owner DSCR loans, are you concerned about that credit risk? You can’t hedge that either. Time will tell. For supply, new listings came in recently 8% ahead of a year ago, sending total active inventory 33% higher versus last year, while the median listing price was 1% lower, all encouraging signs for buyers. (Today’s podcast is found here and this week’s is sponsored by Candor. Candor’s authentic Expert System AI has powered more than 2 million flawless, hands off underwrites. Every credit risk decision Candor makes is backed by a Warranty, eliminating repurchase worries. Hear an interview with Nectar’s Derrick Barker on the long-term implications of builders not meeting market demand for homes.)

Depending on how tuned in you’ve been to changes in our daily rate tracking, the news may be getting old at this point.  Rates have done almost nothing but move higher ever since the Fed cut rates on September 18th. While this continues to be a challenge for some folks to comprehend, it was always a risk, which is why we spent several weeks warning about the possibility leading up to Fed Day.  Thankfully, the increases have been small in the bigger picture.  Today was just another day in that regard, although it was one of the bigger bumps in the road if we look at today’s highest rates versus yesterday’s lowest (Wednesday saw higher rates in the morning and lower rates in the afternoon.  Thursday was the opposite pattern).  Lenders increasingly increased rates throughout the day after an important economic report (ISM Services) showed much stronger than expected growth.  As important as ISM data is, it’s nothing compared to Friday’s forthcoming jobs report.  No other piece of scheduled economic data has as much power to cause volatility for rates. At this point the market has done a fairly good job of processing any remorse it might have had about getting too excited for Fed day and/or any anxiety that has been building about the econ data not being weak enough to justify a fast rate cut pace.  This leaves Friday’s data in a good position to either help or hurt in a fairly big way.  The size of the reaction is generally proportional to size of the “beat” (job creation higher than expected) or “miss” (the opposite). There’s no way to know which one we’re going to get ahead of time.  Occasionally, the data leads the bond market to “thread the needle” with rates ending up not far from where they started.  

ISM Makes For Negative NFP Lead-Off

If the bond market has to digest an ISM Services report that is much stronger than expected, it would be best not to have it come out less than 24 hours before the big jobs report.  Otherwise, you get a day like today where the data fueled a pre-NFP (nonfarm payrolls–the headline component of Friday’s jobs report) lead off toward higher rates.  

Econ Data / Events

Jobless Claims

225k vs 220k f’cast, 219k prev

S&P Services PMI

55.2 vs 55.4 f’cast, 55.7 prev

ISM Services

54.9 vs 51.7 f’cast, 51.5 prev

ISM Employment

48.1 vs 50.2 prev

ISM Prices

59.4 vs 56.3 f’cast, 57.3 prev

ISM Activity

59.9 vs 53.3 prev

Market Movement Recap

08:34 AM Weaker overnight and no major reaction to Jobless Claims.  MBS down 3 ticks (.09) and 10yr up 2.6bps at 3.81

10:05 AM Weaker after ISM. 10yr yields are now up 5bps at 3.833 and MBS are down another 3 ticks (.09) for a total of 6 ticks (.19) on the day. 

03:16 PM pre-NFP drift toward weaker levels.  MBS down 9 ticks (.28) and 10yr up 6.3bps at 3.846

05:13 PM bonds closed near weakest levels, and right in line with the previous update.

There are some labor market reports that cause some concern about a weaker job market.  And while Jobless Claims is often thought to be a leading indicator, it is not one of those reports.  Today’s release is the latest example.  The 225k headline is a bit higher than the forecast of 220k, but still right in line with trends from the 3 most recent, “normal” years.  

As such, the data offered no support for moderate weakness in the bond market.  As for the nature of that moderate weakness, it’s still best viewed as a broad consolidation following the extended rally leading up to the Fed’s rate cut.  There are several ways to look at it.  You could say the market got a bit ahead of itself or that Powell has been a bit more hawkish than the market expected, or that the data hasn’t seen the incremental deterioration needed to sustain the pace of the longer-term rally.
Either way, the consolidation has been orderly, and even with this morning bringing yields in line with their highest levels in a month, the whole thing still looks flat and sideways over the past 2 weeks.  By getting to this point today, the consolidation game is over because tomorrow’s jobs report decides the next move.  All that’s left for today is ISM Services–a report that certainly could cause some last minute excitement, for better or worse.

Treasuries are sliding after companies added more jobs than expected last month, sending a mixed signal to traders who are watching the labor market for signs the Federal Reserve needs to aggressively cut interest rates.

T-Mobile is broadly syndicating $500 million of securities, and the total size of the securitization is $561.34 million.