This is the month of the MBA’s National Secondary in Manhattan. For some trivia, the nickname “The Big Apple” originated in the 1920s in reference to the prizes (or “big apples”) rewarded at the many racing courses in and around New York City. However, it wasn’t officially adopted as the city’s nickname until 1971 as the result of a successful ad campaign… So ads do matter. Mark Zuckerberg thinks that ads will soon all be generated by AI. Not so with legal issues, right? Not so fast: In the UK, Garfield is offering basic legal work that is AI generated. Will AI generate actions for humans to follow? “Rob, did the CFPB send out a memo outlining its priorities going forward?” Yes, it did, unfortunately through the former Twitter: X. Here’s the memo. Things like supervisory exams will drop by 50 percent because they’re expensive, a shift in attention to depository institutions and away from non-depository companies. And a focus on actual fraud against consumers. (Today’s podcast can be found here and this week’s are sponsored by HomeEQ, the fully digital HELOC from Arc Home, which empowers brokers to quickly provide borrowers with easy access to their home equity. Brokers can benefit from competitive compensation, along with comprehensive training and a complete marketing plan designed to help them re-engage former clients and grow their business. Hear an Interview with Vesta’s Mike Yu on hype versus reality when it comes to AI tech in mortgage, and how companies can vet technology vendors.)

Bonds have been on both sides of unchanged so far today. The overnight session began with slightly higher yields followed by a gradual rally.  By 9am ET, bonds were modestly stronger on the day. Some traders are focusing on German political developments with early indications that expected Chancellor Merz didn’t have the votes to win today’s election. After a second round of voting (a big deal in German politics), Merz is in, and German bunds are coming off their weakest levels. There’s been some correlation with US Treasuries finding a supportive ceiling. Today’s only big ticket calendar event is the 1pm 10yr Treasury auction.
Broader momentum arguably remains sideways with yields looking for support near 4.35%–a level that had generally acted as a ceiling in the narrow March range that preceded tariff-related volatility. 

As the lock-in effect deters many current homeowners from buying, the housing market is seeing younger clients stepping in, often with government-backed loans.

The Consumer Financial Protection Bureau under President Trump plans to make changes to the rule governing consumer financial data rights despite rare bipartisan support for the regulation.

The $1.15 billion agreement earmarked for general corporate purposes can increase to $2.25 billion pending the lender’s acquisition of Mr. Cooper.

The company took a break from securitization during the first quarter but was able to get a deal done shortly after the fiscal period ended.

The Federal Home Loan Bank of Atlanta exceeded its funding commitment by nearly $1 million, while its Dallas counterpart gave out $2 million in 2024.

Selling Spree Continues, But Gently

Bonds were focused on this morning’s ISM Services Index with some traders waiting to see more evidence of economic fallout from tariff-related uncertainty. Instead, the index moved slightly higher and was rather uneventful by the time all sub-components were considered.  Not enough fuel there for bond bulls, so the bears kept the 3 day selling spree going, ultimately getting 10yr yields back over the 4.34 technical level that got so much play time in March. 

Econ Data / Events

ISM Services

51.6 vs 50.6 f’cast, 50.8 prev

ISM Prices

65.1 vs 60.9 prev

ISM Employment 

49.0 vs 46.2 prev

Market Movement Recap

09:36 AM stronger overnight, but modestly weaker in early trading.  MBS down 2 ticks (.06) and 10yr up 1.3bps at 4.324

10:29 AM Additional weakness after ISM data.  10yr up 3.7bps at 4.346.  MBS down an eighth of a point. 

11:12 AM Bouncing back a bit.  MBS down only 3 ticks (.09) and 10yr up 1.8bps at 4.329

01:39 PM 10yr up 5.5bps at 4.366 and MBS down nearly a quarter point.

03:17 PM Nice little bounce off the weakest levels.  MBS down 2 ticks (.06) and 10yr up 2.8bps at 4.338

Mortgage rates faced a slight headwind on Monday as economic data caused weakness in the bond market. This would typically result in higher mortgage rates, but in today’s case, the damage was minimal. One thing to keep in mind is that mortgage rates don’t change in real time with the market. Lenders set rates once in the morning and only change them when the bond market experiences a certain threshold of volatility. A small handful of lenders met that threshold and ended up raising rates this afternoon, but the average lender remained right in line with Friday. The implication is that if the bond market were to start tomorrow exactly where it’s ending today, most lenders would be in a position to set tomorrow’s rates slightly higher. This is purely hypothetical, however as there’s no way to know which direction bonds will move overnight.

Today celebrates Mexico’s victory over France in the Battle of Puebla on May 5, 1862. (In this country, Hispanic home ownership rates continue toward 10 million, which includes, of course, Mexicans. In Mexico itself, mortgage rates are north of 10 percent and homeownership is less than 60 percent.) Returning to the note about today, it was a relatively minor battle (and the French reclaimed Puebla a year later) but a symbolic one because a small Mexican army defeated a larger occupying force. By 1867, Mexican troops had driven France from the country. Cinco de Mayo is not Mexico’s Independence Day (September 16) which commemorates the Grito de Dolores, a priest’s ringing of a church bell in the town of Dolores in 1810 that triggered Mexico’s War of Independence from Spain. Mexico is just one of twenty Hispanic countries, and lenders know that the rise in overall Hispanic home ownership in recent years played out in first-time home buyer numbers and many have “diversity” departments that encompass many lending facets including minority homeownership. Viva la Raza! (Today’s podcast can be found here and this week’s are sponsored by HomeEQ, the fully digital HELOC from Arc Home, which empowers brokers to quickly provide borrowers with easy access to their home equity. Brokers can benefit from competitive compensation, along with comprehensive training and a complete marketing plan designed to help them re-engage former clients and grow their business. Hear an interview with TD Bank’s Scott Lindner on how to better educate potential homebuyers on financial readiness and engender loyalty that will lead to repeat business.)