Homebuilding industry CEOs said tariff impacts would likely be felt in the back half of the year, but affordability concerns are applying pressure now.

Sen. Dick Durbin, the Senate’s No. 2 Democrat, announced he will not seek reelection in 2026, concluding more than four decades in Congress. The Illinois lawmaker leaves behind a notable imprint on U.S. financial policy, particularly regarding swipe fees.

The president said he had “no intention” of firing the Federal Reserve chair and promised that tariffs against Chinese imports would be lowered “substantially.”

Federal Reserve Gov. Adriana Kugler said tighter monetary policy has proved to be less impactful on nonbank lenders during the post-pandemic era.

Long-maturity Treasury yields tumbled Wednesday as part of a broader rally in dollar-denominated risk assets, after US President Donald Trump said he wasn’t inclined to fire the head of the Federal Reserve and suggested tariffs on Chinese imports could drop.

Bonds Lose Almost All The Gains After Inflation Warnings in The Data

Bonds started out sharply stronger today after Trump walked back previous comments on Fed Chair Powell. Headlines regarding lower tariffs for China also helped, but they helped stocks more. The good times began unravelling with the 9:45am S&P PMI data.  Both manufacturing and services PMIs showed sharp increases in prices.  This is one of the first clear examples of tariffs impacting inflation data. Markets were quite willing to trade the data this time (unlike with the recent CPI/PPI releases–probably because those showed lower inflation in a world that feared higher inflation) with bonds ultimately almost fully erasing the AM gains.

Econ Data / Events

S&P Global Services PMI

51.4 vs 52.5 f’cast, 54.4 prev

S&P Global Manufacturing PMI

50.7 vs 49.1 f’cast, 50.2 prev

Market Movement Recap

10:05 AM Sharply stronger overnight on Trump’s reversal on Powell/China.  MBS up nearly half a point and 10yr down 9bps at 4.304

10:41 AM Losing some ground as bonds react to inflation implications in PMI data. MBS still up 3/8ths, but down a quarter point from highs.  10yr down 5.8bps at 4.338 but up 7bps from lows.

03:39 PM More selling, but finding some support.  MBS still up an eighth on the day and 10yr down 1.7bps at 4.38

Mortgage rates are an extension of the financial market, so it’s no surprise that they’ve been more volatile than normal over the past few weeks as markets react to fiscal headlines. The latest dust-up involved Trump’s criticism of Fed Chair Powell which resulted in higher rates over the weekend. Now today we’ve had several comments from Trump (starting yesterday evening) saying that he was never planning to fire Powell and just generally conveying a more measured tone. Financial markets responded favorably. Had this been the only news of the day, rates would have dropped almost an eighth of a point.  We can arrive at this conclusion due to trading levels in the bond market at the time.  But other news pushed back in the other direction. Specifically, a closely watched gauge of business activity showed the sharpest spike in prices in 13 months in the services sector and 29 months for the manufacturing sector. Higher inflation begets higher rates, all other things being equal. Many mortgage lenders were forced to raise rates during the day, ultimately resulting in today’s average being only modestly lower than yesterday’s.  

“I won a million dollars and donated a quarter of it to charity! I now have $999999.75 left.” Money can be funny… or not. In the past, a “flight to quality” or “flight to safety” didn’t involve feckless investors searching for a place to park their money when there was turmoil in the world. It usually involved buying securities issued in the United States, like bonds or MBS. That has changed, hence gold hitting $3,400 dollars an ounce, prompting analysts to wonder if the United States’ (which in the past was the world’s strongest economy) dollar is still thought of as the world’s reserve currency. Despite U.S. stocks being down 10 percent this year, U.S. bond prices and interest rates have done little. Will we only care if it impacts our borrowers? Perhaps. The spring homebuilding season is slower than usual, with housing starts are down 11.4 percent in March month-over-month. Direct and indirect reverberations from tariffs are an element of this; while 7 percent of goods that go into residential construction are imported, economic concerns about the health of the economy are a fairly large factor in the decision whether or not to buy a new home. (Today’s podcast can be found here and this week is sponsored by nCino, makers of the nCino Mortgage Suite for the modern mortgage lender. nCino Mortgage Suite’s core products unite the people, systems, and stages of the mortgage process. Hear an interview with dataQollab’s Adam Quinones on how traders are making sense of unpredictability in markets recently.)

Two factors had been contributing more than others to drive bond yields higher as of yesterday.  The broader, ongoing factor is/was the tariff/trade stand-off with China. Whether approached through the lens of inflation or decreased foreign appetite for USD assets (a byproduct of decreased consumption of foreign imports), excessive tariffs have not been good for bonds.  The more timely factor was Trump’s tirade against the Fed Chair last Thursday and again on Monday.  Global markets sold USD assets in response.  Then in the blink of an eye last night, Trump said he’s not really thinking of firing Powell AND that tariffs on China won’t be as high as initially announced.  USD assets rallied and they continue to rally this morning.  The end. 

Chairman and CEO David Spector, in weighing Rocket Cos.’ purchase of Mr. Cooper, suggested Pennymac’s balanced business model couldn’t be duplicated.