Granted, the bond market lost some ground yesterday afternoon, but the more important takeaway was the day-over-day gains that  successfully confirmed Wednesday’s break below the 3.17% technical level in the 10yr.  It’s not that this is some magic line in the sand, but in this case, it showed a willingness to reject the anxiety that dominated the previous week (in which 3.17 was the lowest yield). 

With the benefit of clarity from the Fed and some additional bond-friendly data in the ensuing week, we can continue to view last week’s highs as THE highs and instead focus on identifying the lower boundary of what we still expect to be a volatile, sideways range.  Zooming in to hourly candlesticks, we see a case to add 3.13% back to the line-up of technical levels as it served as the ceiling for overnight trading today (and had been on the list in the past when it served as a floor earlier this week).

If you happen to follow along with intraday bond market movements today on MBS Live, keep in mind that

Most of today’s mortgage rate headlines suggest that rates are higher this week.  Nothing could be farther from the truth.  Well, a few things could be, but the point is that rates are definitely quite a bit lower than they were last week.  They’re also lower than they were yesterday or the day before. In some cases, the size of the drop in rates is puzzlingly large.  I addressed the reasons for this in yesterday’s commentary which is very long, but worth a read if you’re curious.  Here it is: https://www.mortgagenewsdaily.com/markets/mortgage-rates-06222022 As for today’s “higher rate” headlines, those are products of the longstanding tradition among media outlets of relying on Freddie Mac’s weekly rate survey for one big mortgage rate article each week.  There’s no glaring issue with Freddie’s survey data if you’re interested in tracking broad trends over long periods of time, but the survey methodology can result in stale or even misleading week-over-week rate changes.  Long story short, most of the responses come in right at the beginning of any given week, but the survey isn’t published until Thursday.  That means we’re usually getting a glimpse of Monday vs Monday rates with a 3 day lag.   Moreover, Freddie includes points in their survey, which isn’t a bad thing at all.  The only thing that makes it bad is that news media and consumers alike are interested in “the rate” and don’t tend to consider the counterpoints raised by the fluctuations in upfront costs (our daily rate data adjusts for upfront costs automatically, for what it’s worth).  

Big Intraday Weakness Against Backdrop of Bigger Picture Strength

MBS lost more than 3/8ths of a point between 1030am and 330pm today and 10yr yields rose roughly 8bps during the same time.  But even after those losses, the day-over-day gains were roughly the same size (i.e. MBS 3/8ths stronger and 10yr yields more than 7bps lower).  Credit the PMI data overnight in Europe for a strong start this morning and domestic PMI data at 9:45am for another injection of bond buying momentum.  The bigger picture is actually brighter dur to today’s movement (and data).  Well, brighter for bonds, not the economy…

Econ Data / Events

Jobless Claims 229k vs 227k f’cast, 231k prev

Market Movement Recap

08:40 AM Moderately weaker overnight, with all of the gains happening right at the EU open in response to weaker econ data.  10yr down 6bps at 3.10 and MBS up nearly a quarter point.

09:59 AM Bonds bulls started running after the 9:45am PMI data which showed slower growth and a big deceleration in prices.  10yr down 12.7bps at 3.033 and 4.5 UMBS up 5/8ths of a point.

02:02 PM Off the best levels of the day and slipping slowly since 11am.  10yr still down 10bps at 3.06 and MBS still up more than 3/8ths. 

03:47 PM Weaker momentum continues and has now erased more than half of today’s gains.  Bonds are still well into positive territory, but more than 3/8ths of a point below the highs in MBS.  10s are up more than 8bps from the lows, but still down 6+ bps at 3.093.  

A slew of PMI reports (Purchasing Manager Indices, which are essentially more granular, more timely, and only slightly more focused versions of GDP) sparked a massive rally in European bonds overnight.  That spilled over to US bonds but without extreme effect.  Things improved after domestic PMI data made similar suggestions (slower growth and less inflation), with bonds at their best levels since before the last fateful CPI report (the one that sparked last week’s drama). 

Barring another CPI-like surprise, recent data and market movement confirm we’ve seen a ceiling in rates (i.e. when 10yr yields topped out at 3.50% last week.  Since then, they’ve broken June’s uptrend and taken out key technical levels at 3.31, 3.19, 3.13, and now this morning, 3.07.

Crypto and blockchain technologies have some valid applications but when it’s just for investment, there are tons of scams. (And what would we do for passwords if it weren’t for our pets?) Since the dawn of history people have been trying to take things of value from others. The industry is discussing the latest breach, especially as it seems, once again, that “it is not a matter of if but of when.” “Flagstar Bank recently became aware of a privacy breach that occurred during December 2021 involving unauthorized access to Flagstar Bank’s network. Flagstar Bank is in the process of providing their impacted customers with written notice of this privacy breach. The written notice includes an offer of free credit monitoring by Kroll, subject to the customer’s enrollment in the monitoring offer. Impacted customers can call Flagstar Bank at (855) 503-3384, or impacted customers may also obtain additional information online.” (Today’s podcast is available here and this week’s is sponsored by Candor. With Candor’s Machine as an Underwriter, lenders modernize their manufacturing infrastructure making them immune to margin, capacity, and staffing challenges forever. Today’s features an interview with Rida Sharaf of USRES on default servicing technology activity.) Title Industry and Technology Many lenders find themselves somewhere in the middle of the digitization movement; they use piecemeal software solutions like secure document transfer or eSignatures to digitize some parts of the mortgage process, but still rely on a number of manual tasks or communications to complete the loan. Not only does this create a disjointed and possibly confusing experience, but it also fails to capitalize on the efficiencies that technology should provide. The answer? A single end-to-end solution from a digital title company that can optimize workflows, enhance communication, accelerate document transfer, and make the entire process more convenient for everyone. Read Radian’s article, Transforming Title to Meet the Demand for Digital to learn how a digital title partner can help you do business better.