While there’s no way objectively quantify the political ramifications of the failed assassination attempt on former President Trump over the weekend, history suggests–at the very least–that such occurrences are not damaging for a candidate’s political capital.  As one example, Reagan’s approval rating immediately jumped 8 points after being shot in 1981.  There does seem to have been an initial market reaction in the overnight session, but much like with the presidential debate reaction, it was very underwhelming in the bigger picture.  This doesn’t preclude a bigger reaction in November, but as in 2016, the most important political change would be one that results in a one-party sweep (House, Senate, Oval Office).

Yes, I know that this is a mortgage commentary, but some things are way above that. (Warning: tissues may be required; what’s happened legislatively since?) Dr. Ruth, who was sent to a Swiss orphanage by her parents were killed during the holocaust, died, as has fitness guru Richard Simmons, actresses Shelley Duvall, and Shannen Doherty. None of this has anything to do with mortgages, other than we as lenders are constantly involved in the fabric of our client’s lives. It seems like, at least over the past couple of years, time has flown by. It’s been four years since we were all watching called “The Tiger King.” The pandemic is ancient history in terms of mortgage rates. Four years since the last summer Olympics were scheduled. World Financial Group announced that Olympic and X Games gold-medalist snowboarder Shaun White will headline the company’s Convention of Champions this week. Don’t confuse Shaun with Sage Kotsenburg and his Totally Dope Refi Mortgage…a classic short clip. (Today’s podcast is found here and is sponsored by Calque. Calque provides a binding backup offer on a borrower’s departing residence, which empowers lenders to provide a bridge-like experience with easier qualification and less risk. Today’s episode features an interview with PHH Correspondent Lending’s Taylor Adams on the current state of correspondent lending. Lender and Broker Software, Services, and Products Home insurance pricing and availability continue to challenge homebuyers and existing homeowners in 2024. Matic, a digital insurance platform built for the mortgage industry, helps your borrowers find the best price and policy options by offering quick access to a network of 40+ A-rated insurance carriers directly within the loan closing or servicing experience. Seamlessly integrating into your existing processes, Matic saves time and reduces administrative burdens for processors, automating tasks like insurance document delivery. Our platform also enhances the borrower experience and opens up a new revenue stream for your business, with each policy generating additional income. Learn how mortgage enterprises can deliver automated, personalized insurance offers to your borrowers by booking a demo today.

Property insurance and taxes account for over one-third of current loan performance risk, according to Auction.com’s recent survey of default servicing leaders.

Second quarter margins at the three big banks were lower versus three months’ prior, missing Keefe, Bruyette & Woods expectations of a flat comparison.

The new regulation goes into effect in early 2025 for properties financed by Fannie Mae or Freddie Mac.

Two days after the megabank was hit with $136 million of fines, Citi executives said they aren’t changing the company’s full-year expense guidance. Citi has 30 days to submit a plan to regulators showing that the bank has allocated enough resources to achieve compliance in a timely and sustainable manner.

Investment banking fees shot up at the nation’s largest bank, thanks to rebounds in M&A and the equity capital markets segment. And despite higher credit costs in the company’s card business, a top bank executive expressed confidence in the health of U.S. consumers.

Pleasant PPI Paradox Leaves This Week’s Big Victory in Focus

The Producer Price Index (PPI) introduced a brief but disconcerting threat to this week’s relative level of triumph (courtesy of yesterday’s CPI) by suggesting a big, unexpected surge in core inflation at the wholesale level.  Bonds initially panicked, but quickly got back on track and never looked back.  Thankfully, the components behind the PPI surge are not the same components that would translate to PCE inflation in 2 weeks.  We can also consider PPI’s notorious volatility and conclude it would take more than one of these surprises to raise a serious eyebrow. With that, the focus of the week remained squarely on yesterday’s big CPI victory.  

Econ Data / Events

Core PPI M/M

0.4 vs 0.2 f’cast
last month revised to 0.3 from 0.0

Core Annual PPI

3.0 vs 2.5 f’cast, 2.3 prev

Consumer Sentiment

66.0 vs 68.5 f’cast, 68.2 prev

Consumer inflation expectations

1yr down 0.1
5yr down 0.1

Market Movement Recap

08:43 AM Slightly stronger overnight but giving back gains after PPI.  MBS unchanged.  10yr up 0.3bps at 4.216.

10:31 AM healing continues.  MBS up an eighth.  10yr down 1.6bps at 4.197

01:07 PM Flat and sideways at the same levels as the last update.

04:43 PM Bonds heading out at or near best levels with MBS up nearly 3/4ths and 10yr down 2.6bps at 4.187.

Yesterday was all about the CONSUMER Price Index (CPI), which helped mortgage rates drop at the 2nd fastest pace of the year.  Today brough the PRODUCER Price Index (PPI), and the message was a bit different. While PPI is not in the same league as CPI in terms of its impact on rates, there have been several recent examples that have left a mark on the market, for better or worse.  When this morning’s installment came out, it looked like we’d have another example to count, and not the good kind. Between the new headline and the revision to last month’s numbers, annual PPI ended up a half a percent higher than the market expected. If that sort of thing happened in CPI, rates would absolutely skyrocket. Even though it was a PPI problem, it still would not have been a surprise to see at least SOME upward pressure today. But instead, rates managed to move LOWER, albeit not by much.  Still… any improvement in the wake of such numbers requires an explanation.  In this case, it came down to the underlying components of the PPI data not translating to the consumer-facing inflation metrics that guide rate policy.   In other words, sometimes higher PPI suggests upward pressure on the PCE inflation data (the broadest national measure of consumer inflation and the most closely-watched by the Fed), but today’s report did not.  Bonds initially panicked for a split second, but then eased into modestly stronger territory and stayed there all day without any drama.

The Producer Price Index (PPI) is certainly not in the same league as CPI when it comes to bond market impact, but there have been several notable reactions in the past year.  It was a concern, then, to see core PPI come in 0.2 higher than expected and for last month to be revised 0.3 higher.  But while there was an initially negative reaction in the bond market, it wasn’t big and it didn’t last long. The “why” has to do with the components of PPI that directly impact the more important consumer inflation metrics like the PCE price index coming out later this month. Simply put, the big beat in PPI was driven by categories that don’t translate to PCE.