While listings are ticking up, house hunters are still struggling to find affordable properties. But thanks to high mortgage rates, there aren’t enough buyers in the market to create the level of competition that would drive prices up more significantly.

MBS Continue to Outperform, Sorta

Despite a nice little rally from weaker opening levels to stronger closing levels, it was a strikingly uneventful and uninteresting day for the bond market.  Yields continued to operate in the same old range with 15 of the past 17 days trading inside the range set on NFP Friday.  One of the only ways to concoct an interesting narrative would be to call attention to MBS outperformance (5.5 coupons were a bit stronger on the day while 10yr yields were a bit weaker). We could simply say “Treasury auction cycle” and be done with it, but that’s an oversimplification.  Besides, MBS don’t always outperform on auction weeks.  The more accurate observation is that the short end of the Treasury yield curve outperformed the long end, and MBS have more in common with the short end these days.  In other words, it wasn’t really outperformance by the time we compare MBS with the more appropriate benchmarks.

Econ Data / Events

Case Shiller Home Prices

up 6.5% y/y vs 6.0% f’cast
up 0.6% in June

FHFA Home Prices

down 0.1% in June vs +0.2% f’cast
up 5.1% y/y vs 5.3% f’cast

Consumer Confidence

103.3 vs 100.7 f’cast, 101.9 prev

Market Movement Recap

08:57 AM Steadily and moderately weaker overnight.  10yr up 4.5bps at 3.859 and MBS down an eighth.

11:40 AM MBS back to unchanged.  10yr up 2.9bps at 3.844

03:54 PM Best levels of the day for MBS, up 2 ticks (.06).  10yr down 1.5bps at 3.829

Economists are also forecasting faster and deeper cuts to borrowing costs over the next year, and see the central bank reducing the policy rate from the current 4.5% to 3% by next July.

The interagency Property Appraisal and Valuation Equity initiative, which was tasked by the Biden administration with rooting out bias in home valuations, appears to have run its course. But experts say it could be years before the group’s efforts bear fruit.

The Federal Trade Commission has arranged the payment of hundreds of thousands of dollars to people a law firm charged for lower rates they never received.

Lower interest rates could bolster loan demand, credit quality and securities portfolios. But they could also curb lending profitability faster than they ease deposit costs, crimping net interest margins and eating into near-term profits.

The company will fund the discount across the first two years through a special escrow account.

Uneventful Monday Despite AM Volatility

Durable goods data made for a semblance of volatility this morning, with the core components resulting in a small rally at 8:30am.  Bonds bounced back into weaker territory at 9:30am amid NYSE tradeflows.  There was another mini-rally and another mini-sell-off ultimately giving way to an extremely narrow range near unchanged levels for the rest of the day.  MBS outperformed Treasuries by an amount that makes good logical sense on a Treasury auction week.  All in all, it may as well have been a 3 day weekend.

Econ Data / Events

Durable Goods

9.9 vs 5.0 f’cast, -6.9 prev

Core Durable Goods

-0.1 vs 0.0 f’cast, 0.5 prev

Market Movement Recap

08:46 AM Modestly weaker overnight and recovering after Durable Goods data.  MBS unchanged.  10yr down 0.6bps at 3.794

10:01 AM Back into negative territory.  MBS down 2 ticks (0.06) and 10yr up 1.7bps at 3.817

03:19 PM Sideways in a narrow range since the last update.  MBS unchanged and 10yr up 1.4bps at 3.814

In a complaint filed by the Justice Department on Friday, antitrust enforcers said RealPage’s software, which helps landlords set rental unit pricing, has effectively raised prices on renters illegally.

Vice President Kamala Harris’ pledge to deliver 3 million homes has drawn applause from homebuilders, lenders and affordability advocates, but experts are uncertain how her administration would pull it off.