Thursday’s Data Offered No Objection to Overnight Rally

Thursday’s PPI was just as tame as Wednesday’s CPI and, for a moment, it looked like bonds were going to offer an encore performance of the post-CPI rally.  But in Thursday’s case, bonds had already rallied nearly that much in the overnight session.  We’re inclined to view this through the lens of Thursday’s data standing aside for the momentum created by Wednesday’s data.  In other words, CPI prompted a lead-off rally and PPI didn’t push back in the other direction.  We can also give some credit to Jobless Claims where the continued claim number pushed up to another cycle high. Yields didn’t stray far from where they were 10 minutes after the morning’s data.  

Econ Data / Events

Core MM PPI

0.1 vs 0.3 f’cast, -0.2 prev

Core YY PPI

3.0 vs 3.1 f’cast, 3.2 prev

Monthly Headline PPI

0.1 vs 0.2 f’cast, -0.2 prev

Jobless Claims

248k cs 240k f’cast, 248k prev

Continued Claims

1956k vs 1910k f’cast, 1902k prev

Market Movement Recap

08:36 AM MBS up a quarter point and 10yr down 6.2bps at 4.362 (most of these gains were before the data).

01:24 PM No sustained improvement despite decent 30yr auction.  MBS up 9 ticks (.28) and 10yr down 5.5bps at 4.368

04:12 PM Heading out close enough to best levels with MBS up 9 ticks (.28) and 10yr yields down 6.7bps at 4.356

As part of the acquisition, Hallmark Home Mortgage’s CEO Deborah Sturges will join Fairway as the firm’s president.

The past two Federal Reserve vice chairs for supervision failed to implement the final installment of the Basel III capital framework. Newly installed Vice Chair for Supervision Michelle Bowman is taking a new approach to the thorny question of bank capital.

Mortgage applications rose 12.5% from last week, breaking a month-long streak of decline and offering a positive note as summer approaches.

Real estate players disclosed losses in 12% of incidents, and the average financial hit was $16,829, according to data from the past decade.

The trade group, whose industry has come under attack by the growth of title insurance alternatives, cited Morton’s lobbying expertise for his promotion.

Nice Rally on Data and Auction Results

Wednesday ended up being a straightforward session for bonds with a large CPI beat prompting a decently swift rally in the bond market. Shorter maturities did the best–also logical considering the proximity to the Fed Funds Rate and the fact that Fed rate expectations rallied 8+ bps. But longer maturities got a bit more love after a well-received 10yr Treasury auction at 1pm. Respectable results on a day where bonds are already rallying are all the more respectable.  With that, bonds hit new low yields for the day (MBS hit new highs) and neither strayed far after that.

Econ Data / Events

Core CPI m/m 

0.130 vs 0.3 f’cast, 0.2 prev

Core CPI y/y

2.8 vs 2.9 f’cast, 2.8 prev

Market Movement Recap

08:44 AM 10yr yields are down 3.7bps at 4.439 and MBS are up a quick quarter point.

01:03 PM Decent 10yr auction considering the AM rally.  Bonds improving slightly as a result.  10yr down 5.6bps at 4.42 and MBS up 11 ticks (.34).

04:01 PM Near best levels in final hour.  MBS up 3/8ths and 10yr down 6.1bps at 4.415

After a calm start to the week on Monday and Tuesday, we were likely to see a bit more volatility on Wednesday due to important events on the calendar. The first was the morning’s release of the Consumer Price Index (CPI), a key inflation report. Inflation is one of the most basic inputs for the bond market. Bonds, in turn, dictate interest rate movement. In general, higher inflation coincides with higher rates and vice versa.  Today’s inflation data came out much lower than the market anticipated. Bonds improved quickly in response thus allowing mortgage lenders to offer lower rates.  The average lender is back in line with levels seen on June 5th. The second important event was the scheduled 10yr Treasury auction. Treasuries are bonds that correlate well with mortgage-specific bonds. As such, a decisive move in 10yr Treasury yields usually means mortgage rates are making similar moves.  Today’s auction didn’t add too much benefit over what was already in place after the inflation data, but it certainly didn’t hurt. If anything, the average lender is holding back just a bit relative to where they would normally be given the market’s trading levels.  This is fairly normal when trading has been volatile. If bonds maintain these gains tomorrow, we could see additional improvements (emphasis on “if”).  

Here in Tampa, I was walking through the hotel bar last night when I overheard someone say, “Age 60 might be the new 40, but 9:00 PM is the new midnight.” True dat. (There is also plenty of attention on the House Financial Services Committee advancing the Trigger Leads Bill.) Speaking of Florida, the state has certainly been subject to some dramatic business cycles over the last 100 years since the railroads helped populate the Sunshine State. ATTOM released its May 2025 U.S. Foreclosure Market Report, which shows there were a total of 35,498 U.S. properties with foreclosure filings, default notices, scheduled auctions, or bank repossessions, down 1 percent from a month ago but up 9 percent from a year ago: fewer starts but a continued rise in completed foreclosures. Delaware, Florida, and Illinois posted highest foreclosure rates. (Today’s podcast can be found here and this week’s are presented by Flyhomes, the leading wholesale lender for Buy Before You Sell solutions. Whether your borrowers run into DTI issues, need to unlock home equity for down payment, make a stronger, cash-like offer, or even move potentially with no cash out of pocket, Flyhomes provides a full suite of financial products to help them move forward, before selling their current home. Hear an interview with Flyhomes Dan Richards on the growing buy-before-you-sell (BBYS) market, with insights on the process, competitive advantages, wholesale focus, industry trends, and how brokers and consumers can get up to speed on this evolving home buying solution.)

Heading into today’s CPI data, our stance was that we’d need to see the monthly core number come in at 0.1 vs 0.3 in order to see much of a friendly response, and that is exactly what’s playing out.  If markets weren’t taking inflation with a grain of salt at the moment, this would likely be worth a much bigger response.  As it stands, Fed Funds Futures didn’t even erase the spike seen after last Friday’s jobs report, and 10yr yields only dropped to 4.42 before bouncing–well short of the 4.39 pre-NFP levels.