There are no significant economic data on tap today.  The only notable event is the 7yr Treasury auction (the last of the week) and it’s a bit of a stretch to refer to a 7yr auction as “notable.”  Far more interesting were the overnight developments in Japan, resulting in a 34yr low for Yen vs the dollar.  Yen weakness has often precipitated selling of USD-denominated assets (like Treasuries) by the bank of Japan. This is never enough to completely change a trend in US rates, but it has added volatility at times.  In light of that news overnight, waking up to modest gains this morning is a victory.
Here’s the longer-term relationship between rates and Yen:

There are certainly other variables in play that contribute to this generally inverse relationship and there is certainly plenty of variation over shorter time horizons.  Today has proven to be a good example.  The actual phenomenon of long-term lows for Yen was not a huge deal as it was just a small extension of existing weakness.  Moreover, investors who’d been worried about negative comments from the Bank of Japan (BOJ) were instead treated to a more moderate approach.

In other words, there are past examples of major Yen weakness that result in the BOJ saying it will take measures to bolster the Yen.  Those “measures” are either explicit promises to sell USD-denominated assets or they’re vague comments that are assumed to be the same.  In today’s case, there were no such comments–at least not yet.  The BOJ and Japan’s Ministry of Finance will be meeting at 6:15pm ET to discuss an official response to Yen weakness. 
How much could that impact Treasuries?  That remains to be seen, but it wouldn’t be nearly enough to counteract any cohesive message in domestic economic data.  In other words, it would just add noise to the front line market movers for US rates. 

The Mortgage Bankers Association said its Market Composite Index moved lower last week, apparently indifferent to a slight improvement in mortgage interest rates. The Index, which measures loan application volume, decreased 0.7 percent on a seasonally adjusted basis from one week earlier.  On an unadjusted basis, the Index declined 0.4 percent compared with the previous week. The Refinance Index decreased 2.0 percent from the previous week and was 9.0 percent lower than the same week one year ago. The refinance share of mortgage activity accounted for 30.8 percent of total applications compared to 31.2 percent the previous week. [refiappschart] The Purchase Index ticked down 0.2 percent both before and after its seasonal adjustment.  It was 16.0 percent lower than the same week one year ago. [purchaseappschart] “Mortgage application activity was muted last week despite slightly lower mortgage rates. The 30-year fixed rate edged lower to 6.93 percent, but that was not enough to stimulate borrower demand,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “Purchase applications were essentially unchanged, as homebuyers continue to hold out for lower mortgage rates and for more listings to hit the market. Lower rates should help to free up additional inventory as the lock-in effect is reduced, but we expect that will only take place gradually, as we forecast that rates will move toward 6 percent by the end of the year. Similarly, with rates remaining elevated, there is very little incentive right now for rate/term refinances.” 

Despite pressure from the Consumer Financial Protection Bureau, the embattled Appraisal Foundation tapped its longtime second-in-command to be its next president.

At the height of the Canadian boom, banks handed out 40% more home loans than pre-pandemic. Half were variable-interest rate mortgages subject to certain risks.

A series of changes to the Telephone Consumer Protection Act go into effect on March 26 that closes the so-called “lead generation loophole” for telemarketing calls and texts.

While the rise of artificial intelligence in home lending brings about “fascination” over its capabilities for some, others claim it’s a technology people might use “to mask their incompetence.”

But home prices declined from December, both the Federal Housing Finance Agency and S&P CoreLogic Case-Shiller found, a possible precursor to a cooling market.

Mixed Performance. Data Hurt. Auction Helped. Little Changed

In the bigger picture, bonds found resistance before 10yr yields managed to break below 4.19, but remained well under the 4.32% ceiling after yesterday’s weakness.  Today began slightly stronger, but shifted weaker after the Durable Goods data.  The home team rallied after the 1pm Treasury auction came out on the strong side and trading levels trickled just barely into positive territory.  Wednesday is the quietest day of the week for econ data, but also the last day of Treasury auctions and the last full trading day of the month/quarter.  Translation: data driven volatility is unlikely, but random volatility surrounding the auctions and month-end trading could make things interesting.

Econ Data / Events

Durable Goods

1.4 vs 1.1 f’cast, -6.9 prev

Market Movement Recap

08:52 AM Slightly stronger overnight and now a hair weaker after data.  MBS down 2 ticks (.06) and 10yr up 0.8bps at 4.257

11:26 AM MBS outperforming, down only 1 tick (.03).  10yr unchanged from last update.

01:09 PM Stronger after 5yr auction.  MBS up 2 ticks (.06) and 10yr down 1.1bps at 4.238

03:32 PM Hanging out near strongest levels.  MBS and 10yr at same levels as last update.

After moving back under 7% last week (conventional, 30yr fixed, top tier scenario), mortgage rates have been increasingly unlikely to move.  Today was the 2nd day in a row with essentially no change for the average lender. Rates are driven by bonds and bonds are waiting on the most relevant economic data to offer a comment on the path of inflation and the economy in general.  If inflation falls a bit more or if the economy shows marked signs of weakening, it would tip the scales in favor of lower rates. Most of the data in question will be released next week.  This week is sparse by comparison.  Today’s data was mixed and it wasn’t highly consequential in the first place.  Tomorrow is essentially data-free.  Thursday brings several reports, but again, nothing substantial.  With Friday being a holiday, the takeaway is that volatility is a much more relevant risk next week.  

Sales of newly constructed homes were virtually unchanged in February. The 662,000 seasonally adjusted annual units recorded in during the month was down by 2,000 units or 0.3 percent from the rate in January. This did, however, put sales 5.9 percent higher than they were in February 2023. The report from the U.S. Census Bureau and the Department of Housing and Urban Development estimated that, before adjustment, sales for the month totaled 60,000 units compared to 57,000 the previous month and 56,000 in February of last year. Thus far this year, sales of new homes are up 4.4 percent over the same period in 2023 at 117,000 units. The median price of houses sold during the reporting period was $400,500 and the average price was $485,000. In February 2023 the relative prices were $433,300 and $499,100. At the end of February there were an estimated 451,000 new homes available for sale. This is a projected 8.4-month supply at the current sales pace and is unchanged from the inventory level one year earlier. Robert Dietz, economist for the National Association of Home Builders noted, “Completed and ready-to-occupy inventory has increased 23 percent over the last year, rising to 85,000 homes. Homes advertised for sale but not started construction have increased almost 18 percent over the last year to 106,000. In contrast, homes available for sale that are under construction have declined 2 percent to 272,000.”