“I hate it when I see an old person and then realize we went to high school together.” Nothing lasts forever, not top lenders or even computer companies. We may reach the point where only old people remember Tandem Computers, Commodore Business Machines, or Fairchild Semiconductor, all thought to be invincible in their time. Is Intel a measure of our economic health? Intel is laying off 21,000 employees. Now, all the talk is AI (see Thought Piece below). AI, of course, does not create new knowledge. Here’s a study showing that AI search engines invent sources and lie for ~60% of queries. Interestingly, OpenAI and Google are asking the government to let them train AI on content they don’t own. Google is shipping the latest “experimental” features of its Gemini 2.0 Flash AI model to more developers across all regions, and people are finding some concerning abilities that include editing out watermarks from photos. The company’s lightweight localized on-device AI model is now equipped with native image generation that can not only produce pictures from a text prompt but also let you conversationally edit images. Users found that it can also remove watermarks with precision, TechCrunch reports. Is that the right thing to do? (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 of nCino’s Casey Williams on some of the biggest opportunities lenders have to speed things up during the origination process, and technology’s role in that transformation.)

So you want to buy a house but already own. These are your options. Many current homeowners would like to sell their home and trade up or down but aren’t sure how in this competitive Real Estate market. If you’re not feeling stuck because of a 2% pandemic era interest rate and resulting payment shock, then it’s probably the daunting task of selling and buying at the same time. Unless you’re one of the lucky few who can afford to purchase a new home without selling, you’re facing a difficult task. Years of strong housing appreciation have created the largest amount of home equity in US history. American homeowners have on average $315,000 in home equity as of Q4 2024 according to Core Logic. The problem most home shoppers face is how to unlock this equity before selling so they can become an attractive non-contingent buyer. Let’s explore the ways. A Home Equity Line of Credit can be a very useful tool when trying to access your homes equity. A HELOC will typically give you access to up to 80% of the equity in your home minus the balance of your existing mortgages. This is a very flexible financial tool. Payments are only due on the balance drawn on the credit line and those payments are typically only for the interest accrued on the loan. No principal payment is required, which keeps the payment low. Very handy when faced with the prospect of owning two homes simultaneously. This is a great option for prospective buyers who can afford the payments on both homes in the short term and who have enough equity available for a down payment on the new home.

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.)