Deadly flash flooding in Texas serves as a reminder of the tactics scammers and fraudsters use against both victims and charitable onlookers.

Following deadly flash floods in Texas, the Office of the Comptroller of the Currency allowed national banks to close branches for safety.

Both government-sponsored enterprises also are tightening rules around condo and co-op loans in buildings that have been involved in insolvency proceedings.

Correction Continues Despite Tariff Announcements

Bonds were moderately weaker to start the day and continued losing ground in the AM hours.  Just after noon, new tariff announcements caused a surge of selling in stocks. There was initially some buying in bonds, but not much, and not for long. Tariffs are a double-edge sword for bonds, as we’ve seen on several occasions over the past few months and today’s version was well balanced, ultimately leaving 10yr yields at similar levels before and after the news. Today’s weakness adds to the multi-day correction that began last Wednesday and accelerated after Thursday’s jobs report. Bond buyers may remain hesitant until getting through more of this week’s Treasury auction cycle.

Market Movement Recap

09:57 AM Modestly weaker overnight with MBS down less than an eighth and 10yr up 2bps at 4.367

11:09 AM Steady weakness continues.  MBS now down 5 ticks (.16) and 10yr up 3.4bps at 4.38

02:16 PM Holding sideways near weakest levels in the PM hours.  MBS down 5 ticks (.16) and 10yr up 4.6bps at 4.392

04:03 PM Still sideways near weakest levels.  MBS down 6 ticks (.19) and 10yr up 4bps at 4.387

For the entire 2nd half of June, it was easy to be spoiled by the absence of volatility in mortgage rates. During that time, rates were either lower or unchanged every single day. The past few business days have been a different story. This began last Wednesday as the bond market began a small correction ahead of Thursday’s big jobs report.  A correction is a normal occurrence that often follows an extended run in either direction. They can be as short as a single day or they can mark bigger picture turning points. We’ll never know if last week’s correction would have been a one day affair because the very next day, the jobs report continued pushing rates higher.  At that point, rate movement was no longer a correction. Rather, it was a response to economic data.  Now at the start of the new week, there’s been some follow-through to last Thursday’s rising rate momentum (Friday was closed for the 4th), carrying the average mortgage rate to the highest levels since June 25th. That’s the bad news. The good news is that June 25th’s rates were the lowest since early April at the time.  

The nation is gripped with the flooding in Texas, the loss of human life and property, and how best to prevent future similar occurrences given the increase in the severity of weather. (Fairway Independent has already donated $1 million to recovery efforts.) Texas is one of the leading models in the U.S. for growth and in lending. We’ve been saying that we have had a housing shortage for so long, in Texas and elsewhere, that any change to that narrative is almost ignored. Yet builders are having to cut prices to attract buyers, unsold inventory has moved higher, and homes are sitting with “For Sale” signs in their lawns for longer. Affordability continues to be an issue, but lenders can only do so much. The U.S. Federal Reserve doesn’t set mortgage rates, but it watches the same economic data as MBS buyers. The odds of a Federal Reserve interest rate cut later this month fell dramatically as new data showed strong growth in the labor market, diminishing the case for lower rates. (Today’s podcast can be found here and this week’s is sponsored by Truework, the only all-in-one, automated VOIEA platform that helps mortgage providers achieve up to 50% cost savings with an industry leading 75% completion rate. Today’s has an interview with Truework’s Ethan Winchell on reshaping income and employment verification through automation, while balancing speed, accuracy, and fairness in an industry ripe for digital transformation.) Products, Software, and Services for Lenders and Brokers

Fresh off the rally reversal courtesy of last week’s jobs report, the bond market now finds itself in a virtually data-free week with little else to inspire big departures from prevailing levels. From last Thursday’s early close, there’s been remarkably little movement so far.  This is all the more notable given the fact that Thursday was the heaviest day of selling in several weeks, arguably ending the rally trend from the 2nd half of June. It’s always possible that unexpected developments will stir things up, but for now, the most obvious flashpoint on the horizon is next week’s CPI data.
In terms of trading levels and trends, the end of the recent rally means we’re waiting to see if we get a sideways holding pattern or full-blown reversal of momentum.  The latter feels like it might require some more justification–at least if 10yr yields were to challenge higher technical ceilings at 4.50+.  About 10bps below that, however, is a perfectly acceptable target for bonds to reset for the next big move (again, most likely driven–or at least confirmed–by next week’s CPI). A break below 4.34 wouldn’t be inexplicably bullish, but 4.29 would require some more concrete motivation. 

Treasury Secretary Scott Bessent indicated that some countries lacking an agreement by the deadline Wednesday will have the option of a three-week extension to negotiate.

Fresh US jobs figures took pressure off the Federal Reserve to consider an interest-rate cut later this month, likely leaving the central bank on hold at least until the fall.

House Republicans overcame internal divisions to narrowly pass President Trump’s tax and spending package Thursday afternoon. The measure would cut the Consumer Financial Protection Bureau’s funding level, among other provisions.