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Financial security is a concern for 31% respondents who said they feel less well-off than their parents or grandparents, a Nationwide survey found.

MBS Outperform. Powell Punts. Waiting on CPI

Bonds showed slightly more notable signs of life this morning when compared to yesterday, but yesterday was all but dead.  The volatility surrounded Fed Chair Powell’s congressional testimony but had more to do with what didn’t say as opposed to what he said.  Specifically, he didn’t express incremental excitement or expectation about econ data justifying a rate cut any time soon, instead leaving it up to the same old “data dependent” mantra.  Bonds had perhaps been hoping for a bit more dovishness.  Even so, trading levels returned to pre-Powell levels by the close.  10yr Treasuries logged a small increase in yield while MBS improved modestly.  Some of that is driven by the yield curve (shorter maturity Treasuries improved and MBS act more like 5s than 10s these days).  Either way, the focus is even more firmly on Thursday’s CPI as far as bond market inspiration is concerned. 

Market Movement Recap

11:47 AM Modestly weaker overnight with additional losses during Powell testimony.  Mainly an issue for Treasuries.  10yr up 4.4bps at 4.324.  MBS down 2 ticks (.06).

01:26 PM MBS roughly unchanged.  10yr up 3bps at 4.31%

03:32 PM Still sideways with modest MBS outperformance.  10yr up 1.4bps at 4.294.  MBS up 2 ticks (.06).

Mortgage rates are based on movement in the bond market and bonds haven’t been moving much over the past 3 days.  That’s resulted in very little change in the average mortgage rate from one day to the next, and zero change today.   Bonds can be inspired by a number of events and data points.  In the past, scheduled congressional testimony with the Fed Chair has been just such an event, but it was not a major consideration today.  Fed Chair Powell reiterated the same messages heard from multiple Fed speakers. The most basic and important message about interest rates is that they depend on economic data.  Some data is more important than other data in that regard and Thursday’s Consumer Price Index (CPI) is arguably the most important.  With that in mind, it’s not hugely surprising to see bonds and rates holding a more narrow range as they wait to see the outcome of CPI.  Some movement between now and then is certainly possibly, but after CPI comes out, movement is all but guaranteed, for better or worse.

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The new week is one day less new today, but no less sideways so far.  Yields rose microscopically in the overnight session, but even that is a generous assessment considering the range in the 10yr was less than 3bps.  Domestic hours are off to a sleepy start with yields in an even narrower 1bp range (essentially 4.29 to 4.30).

MBS have been a bit more willing to move with 6.0 coupons back into positive territory after a weaker start. 

The Treasury yield curve helps explain the outperformance with 2yr yields unchanged and 10yr yields up 1.5bps on the day. 

Against this boring backdrop, there’s nothing to do but wait to see if Powell has something interesting to say in the 10am congressional testimony.  Apart from that, the Treasury auction cycle is another source of potential volatility starting at 1pm, but tomorrow’s 10yr auction is far more capable than today’s 3yr auction in that regard.

More than 50% of aspiring buyers expect their next purchase will cost less than the latest median value, according to the National Association of Home Builders.

Test your knowledge of the biggest mortgage headlines, from corporate name changes to Fed Chair quotes. No. 2 pencil not required!