The Census Bureau released March New Home Sales data this week, and it was near the best levels seen since early 2022.  Before you get too excited about that, a caveat is in order.  Simply put, when it comes to housing market data, nothing has been more uneventful than new  home sales over the past few years.  The chart tells the story. It’s tough to make an entire news article interesting when it comes to this data, so we won’t waste your time.  Instead, here are some bullet-pointed highlights that showcase some of the departures from the status quo (these are common, and they tend to come out in the wash in the longer term):
Sales fell 22.2% in the Northeast region, but had risen just as sharply in the previous month.
Sales jumped nicely in the South for the 2nd straight month (13.6% this time) and are now at their highest levels since April 2021.
The South accounts for 483k of the 724k national total.

The trend is not the norm but there are growing opportunities to buy for less in some areas many people gravitate to, real-estate brokerage Redfin found.

While the 30-year rate landed near its level of a week ago, it ended up there only after political developments led to up-and-down swings in Treasurys.

It is quite likely March’s drop in the Purchase Application Payment Index will be transitory as mortgage rates have increased since the start of April.

Sales of previously owned US homes fell in March by the most since 2022 as buyers remained constrained by high mortgage rates and prices.

Small-business owners will be given the option to tap into anywhere from $50,000 to $500,000 in financing.

Solid Bond Rally For Debatable Reasons

Bonds improved moderately well overnight and added to those gains steadily during the domestic session.  Ask 10 traders why and you might not get 10 different answers, but it would be at least 5. Improvement in the tariff outlook is a common refrain, but forex markets suggest that’s not a huge motivation.  Still, one could argue that a more sober approach is restoring some confidence for bond traders. One could also argue that traders are positioning for economic fallout with next week being the big week for econ data. Then there’s the notion that moving through the Treasury auction cycle was helpful, but it’s not as if traders didn’t know that ahead of time. Last but not least, a comment from Fed’s Hammack (saying the Fed could move in June) did align with some of this morning’s improvement, but not in a way that accounts for an entire day’s worth of gains. Perhaps we’ll have to dust off the “no news is good news” thesis and simply conclude it makes sense for bonds to be consolidating in the pre-tariff range until we get a clearer sense of policy and the economy’s response to it.

Econ Data / Events

Jobless Claims

222k vs 222k f’cast, 216k prev

Continued Claims

1841k vs 1880k f’cast, 1878k prev

Durable Goods

9.2 vs 2.0 f’cast, 0.9 prev

Core Durable Goods

0.1 vs 0.2 f’cast, -0.3 prev

Market Movement Recap

08:58 AM Stronger overnight with additional gains after uneventful data.  MBS up a quarter point and 10yr down 6+bps at 4.32

01:09 PM No major reaction to ho-hum 7yr auction.  10yr yields down 7.7bps at 4.312 and MBS up 3/8ths of a point. 

03:33 PM Best levels of the day.  MBS up nearly half a point and 10yr down 8bps at 4.31

Mortgage rates continue the slow, bumpy process of healing from the rapid rise seen 2 weeks ago. Last week was a solid victory in that sense with rates moving steadily and meaningfully lower without any major rebounds. The present week started out on shakier footing as rates lurched higher on Monday. Fortunately, the sailing has been smoother since then. Today was actually the best day of the week so far for the underlying bond market. Most of the improvement happened in overseas trading overnight, but gains continued in the U.S.  The average top tier 30yr fixed rate fell 0.04% from yesterday. Based on the timing of the bond market gains, if nothing were to change overnight, the average lender would be able to move slightly lower again tomorrow.   NOTE: the preceding is not a prediction.  It’s merely a comment on the fact that the bond market improved a bit more than the average mortgage rate would suggest.  There’s never a guarantee that bonds will do any particular thing between now and the next time mortgage lenders are setting rates for the day.

What’s “normal” for the bond market? That depends how far back you want to look.  Starting in late February, we had about a month of mostly sideways movement in a relatively narrow range as we waited for clarity on new fiscal policies and economic data. The tariff roll-out shook things up, to be sure, but for more than a week now, yields have been back in the same old “normal” pattern. So what’s next? That’s a good question. It could be a big policy shift, or economic data, or a global market event.  No one knows, but we’ll know it when we see it. 

As a counterpoint to the chart above, consider that shorter term bonds have been trending in the opposite direction and at a faster pace.

How to reconcile the outperformance of 2yr yields vs 10yr yields:
(remember that 2s have a lot in common with intermediate Fed rate expectations)