The 30-year fixed-rate mortgage average dropped back below the 7% level as investors reacted positively to news the economy is slowing, Freddie Mac said.

Bonds Continue Taking Their Seats Ahead of The Big Show

Although bonds continued to improve yesterday, the pace of gains has progressively slowed throughout the week.  Our base case was for that momentum to shift sideways or pull back a bit today and that’s exactly what we’ve seen.  It was the base case because it would be a logical move for a market that is leaning in a bullish direction as it waits for the data with the power to endorse or reject the bullish lead-off.  5 straight days of gains (plus a counterintuitive rally following ISM Services) was plenty.  Today’s relatively flat performance is actually just another indication of latent optimism for friendlier data in the future.  As for the “big show,” it remains to be seen how much of the spotlight goes to Friday’s jobs report with next week’s CPI continuing to be at the top of the marquee. 

Econ Data / Events

Jobless Claims

229k vs 220k f’cast, 221k prev

Challenger Layoffs

63.8k vs 63.8k f’cast

Market Movement Recap

09:49 AM Moderately weaker overnight and recovering slightly in 9am hour.  10yr up 1.4bps at 4.29 and MBS down 1 tick (.03).

12:39 PM Sideways near opening levels.  MBS down 2 ticks (.06) and 10yr up 2bps at 4.295

02:20 PM Treasuries near best levels, but still up 0.8bps at 4.284.  MBS down 1 tick (.03).

The outcome of certain economic reports will determine whether the next big move in interest rates is higher or lower.  Two reports are more important than all others in that regard and we’ll get both of the them by next Wednesday. Tomorrow’s jobs report is the more pressing matter.  It may not be quite as important as next Wednesday’s Consumer Price Index (CPI) these days, but it has plenty of power to make or break the day for rates. Today’s data was far less consequential by comparison and bonds coasted sideways after a very respectable winning streak over the past 5 business days.  Bonds dictate day to day movement for interest rates.  As such, today’s mortgage rates were unsurprisingly right in line with yesterday’s. 

“My granddad was responsible for 25 downed German planes in WW II. To this day, he is still known as the worst mechanic the Luftwaffe ever had.” On the anniversary of D-Day, let’s hope the entire world is not involved in a war again, although humans have had a recurring theme of conflict. Scaling things down significantly, but keeping with the “recurring theme” theme… There have been recurring themes in the various conferences and private events, most recently the MBA New Jersey which my son Robbie attended and this one I am attending in San Diego for Bay Equity, that lenders have their eye on. Lowering the cost of doing business, including the closing costs seen by borrowers (and mentioned by the White House and regulators to lower housing costs). Lenders try to use every advantage they have to gain and retain borrowers, and improve operational efficiencies, and how doing that will help originators. Last but not least, the constant decision to retain or release servicing, and the long-term impact of that on business. It is, indeed, a tough environment, entirely different than four years ago when everyone was hiring, hiring, and hiring. (Today’s podcast is found here, and this week’s are sponsored by Visio Lending. Visio is the nation’s premier lender for buy and hold investors with over 2.5 billion closed loans for single-family rental properties, including vacation rentals. Hear an interview with PCV Murcor’s Marc Tatarcuk on how Appraisal Management Companies find and assign appraisers, how AI is influencing the appraisal space, and what the appraisal landscape currently looks like.)

We’ve been anticipating this week of data for the past 3 weeks and it has been delivering on the promise of increased motivation for the bond market.  To make matters better, that motivation has been almost exclusively toward lower rates.  Today is the first day without any top tier econ data and coincidentally the first day without a decisive rally in bonds.  That said, there’s no decisive selling either.  It is shaping up to serve as a very logical day of consolidation ahead of tomorrow’s jobs report which in turn might not pack a normal punch with CPI coming up next Wednesday.
This morning’s only big ticket event was actually the European Central Bank (ECB) announcement, but it hasn’t produced a notable reaction–especially not in the US bond market.  The ECB cut rates for the first time since 2019, which was not only 100% expected, but almost 100% telegraphed by the ECB.  As such, markets focused on the subtly
There was a momentary spat of volatility after the 8:30am Jobless Claims data, but it was quickly traded out.  Yields continue holding the range established by said spat.  There are no additional economic reports for today.  

Ginnie Mae just approved some flexibilities for extended term MBS. Here’s what else is on its roadmap, according to Sam Valverde, the agency’s acting president.

The deal is expected to open up “substantial funding capacity” for Los Angeles-based BARH Dunmore, which launched in 2021.

The company foresees a dampened mortgage originations market through 2026, as last year’s trends continue to have an impact on housing.

The Consumer Financial Protection Bureau issued a final rule pursuant to its broader open banking proposal Wednesday that would require standard-setting bodies to include public interest consumer groups and others to receive bureau recognition.

Staffing cuts affected employees in the reverse-mortgage lender’s retail and corporate units, the company confirmed.