Still, Redwood Trust lost $100 million on a GAAP basis for the period, a result of its previous decision to pivot to a scalable operating model in mortgages.

Markets Expected More Dovishness From Powell

AM data was a mixed bag that left bonds slightly weaker on the day, but not in an alarming way. GDP was mixed, coming in much stronger at the headline, but with lower domestic demand numbers. PCE prices were revised 0.2 higher for the quarter, meaning that tomorrow’s monthly PCE data has a 1 in 3 chance of being the culprit (slightly raises risk of higher inflation reading). But the day’s big focus was on Fed Chair Powell’s press conference. The announcement itself was inconsequential. Powell had a chance to get a bit more dovish in response to recent inflation data, but instead stuck to the exact same script (hoping tariff inflation is a one-off, but wants to wait and see, and has luxury of doing so based on 4.1% unemployment). Bottom line: no bone thrown to rate cut optimists = Fed Funds Futures priced in lower odds for near-term cuts.  This spilled into bonds only modestly, leaving 10yr yields in line with AM highs and leaving the broader trend as sideways as ever. 

Econ Data / Events

ADP Employment

104k vs 75k f’cast, -23k prev

Market Movement Recap

09:29 AM A hair weaker overnight with additional selling after data.  MBS down 5 ticks (.16) and 10yr up 5bps at 4.373

12:53 PM A bit of resilience heading into Fed announcement.  MBS down 2 ticks (.06) and 10yr up 4.3bps at 4.365

02:08 PM very small, friendly reaction to Fed.  MBS down 1 tick (.03) and 10yr up 2.6bps at 4.348

03:22 PM Weaker after Powell press conference.  MBS down 5 ticks (.16) and 10yr up 5.3bps at 4.374

The leading lenders have hinted at more serious accusations in the lawsuit focusing on the departure of nearly two dozen employees earlier this year.

Home prices rose at the slowest pace in nearly two years, signaling a deeper shift as concerns about the economy and mortgage rates dampen consumer demand

In leaving its partnership, Beeline Financial said it disposed of its majority stake in Bridgetown Spirits Corp. in exchange for over $360,000.

Judge Sparkle Sooknanan granted the National Fair Housing Alliance a temporary restraining order which requires HUD to resume distribution of enforcement funds.

Mortgage tech firms are seeking to take advantage of the expected growth of HELOCs with new platform integrations and enhancements of existing tools.

Yesterday, Tampa set a record for its all-time high temperature (at least since man began keeping track, for you sticklers) while rain caused flooding in Reno, NV. It’s good to own an HVAC company. The people there and throughout much of the nation can use some… ice. For ice news of a different type, LOs took note when ICE Mortgage Technology estimated that, heading into the second quarter of 2025, U.S. mortgage borrowers held $11.5 trillion in “tappable” home equity, or equity available for borrowing while maintaining at least a 20 percent cushion. Forty percent of applications are for refis, per the MBA, so owners are certainly tapping into it. And the inventory of homes available for sale has increased. Of course, people don’t want more neighbors, more traffic, more congestion, more kids in the schools, more strain on the water system. The construction industry never fully recovered from the 2008 recession: fewer homes were built in the U.S. in the following ten years than in any decade since the 1960s, even as the population continued to grow. (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. Hear an interview with RatePlug’s Brad and Jeff Springer on how the home property search process is evolving to include accurate, real-time home affordability information.)

After three straight days at exactly the same level, average 30yr fixed rates began to move lower again on Tuesday. It should immediately be clarified that the word “began” implies a certain likelihood of continuation whereas no such likelihoods can be guaranteed when it comes to the bond/rate market. In other words, rates did indeed begin to move lower again, but they could stop moving lower as early as tomorrow. One slight advantage in the present scenario is that the bond market improved steadily throughout the day and most mortgage lenders didn’t drop their rates as much as the bond market improvement suggested. This means that the average lender could lower rates a bit more tomorrow assuming the underlying bond market stays exactly where it is right now. Bonds could easily move either direction tomorrow morning. In addition to volatility that can occur during overnight/overseas trading, there are several big-ticket economic reports set to be released before mortgage lenders set their rates for the day. Then in the afternoon, the Fed announcement can create additional volatility.  Bottom line: today was good, lenders have a bit of a cushion from afternoon bond market gains, and tomorrow is another potentially volatile day (for better or worse). 

Bonds Firing on All Cylinders After Data and Treasury Supply

The bond market was in flow state on Tuesday with decent overnight gains, steady buying after economic data, a strong 7-yr auction despite the rally, and additional buying after the 7-yr auction. It was as if every cue was a green light for buyers. This can be rationalized as a combination of decently friendly data and Treasury supply timing. Yesterday’s auctions didn’t benefit from the updated Treasury borrowing estimates.  Also, those buyers weren’t sure how today’s auctions would go. By the time we got to today’s 7-yr, we knew what the quarterly refunding announcement looked like, all the other auctions were out of the way, data was reasonably helpful, and we suspect some early month-end buyers thought the time was right to get what they needed for Thursday. Perfect little storm? Sure, why not? Continuation likely requires more friendly data tomorrow.  Bonds won’t want to take too big a lead-off ahead of NFP Friday without serious justification. 

Econ Data / Events

Wholesale Inventories (m/m)

0.2 vs -0.1 f’cast, -0.3 prev

Case Shiller Home Prices (y/y)

2.8 vs 3.0 f’cast, 3.4 prev

Case Shiller 20-City (m/m)

0.4 vs 0.8 prev

FHFA Home Prices (m/m)

-0.2 vs -0.1 f’cast, -0.3 prev

FHFA Home Prices (y/y)

2.8 vs 3.2 prev

Consumer Confidence

97.2 vs 95.8 f’cast, 95.2 prev

Job Quits (lower is better)

3.142m vs 3.27m prev

Job Openings (lower is better for rates)

7.437m vs 7.55m f’cast, 7.712m prev

Market Movement Recap

09:55 AM modestly stronger overnight with additional gains at 930am NYSE open.  MBS up 3 ticks (.09).  10yr down 3.9bps at 4.374

11:14 AM stronger after data.  MBS up 6 ticks (.19) and 10yr down 6.2bps at 4.351

01:07 PM Additional gains after 7yr auction.  MBS up 10 ticks (.31) and 10yr down 8.2bps at 4.331

03:41 PM heading out at best levels. MBS up 11 ticks (.34) and 10yr down 9bps at 4.323