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Bonds are starting the new week in slightly stronger territory, but still well inside the prevailing trading range. There were no standout market movers over the weekend although tariff and trade-related uncertainty may be generally weighing on investor sentiment to some small extent. The econ calendar is very quiet throughout the week with Friday’s PPI being the most relevant report (and that’s not saying much). This leaves markets more susceptible to trade and geopolitical headlines, but big moves would require big surprises. 

In a letter to regulators, the consortium of organizations recommended regulatory changes affecting a range of rules from risk weights to warehouse financing.

The Ohio Supreme Court nixed a consumer’s attempt to secure relief for over 1,000 borrowers, regarding fines the lender owed them over late paperwork.

The Trump Administration proposed banning a smaller investor size than expected from purchasing more single-family houses, according to the Wall Street Journal.

Research from Andrew Davidson claims a significant number of mortgage borrowers would have a wide variance in credit score if less than three pulls are used.

Treasury Secretary Scott Bessent said in a public appearance in Dallas Friday that the administration will seek alternative means of enacting the White House’s tariff agenda after the Supreme Court struck down the tariffs as outside the bounds of the law.

Tariff Ruling Tried (And Failed) to Steal The Show

If you were told ahead of time that Friday morning would bring news that the Supreme Court struck down the IEEPA tariffs, you wouldn’t be crazy to think it would be the week’s biggest news and a big potential source of volatility for bonds. But reality wasn’t quite as dramatic. It’s true that the tariff ruling garnered the week’s highest volume as well as some elevated directional volatility, but in outright terms, it was less than 3bps in 10yr yields and about half of that was recovered as the day progressed. Reasons and implications are discussed in greater detail in today’s recap video. 

Econ Data / Events

Core PCE (m/m) (Dec)

0.4% vs 0.3% f’cast, 0.2% prev

Core PCE (y/y) (Dec)

3.0% vs 2.9% f’cast, 2.8% prev

Core PCE Prices QoQQ4

2.7% vs 2.6% f’cast, 2.9% prev

GDPQ4

1.4% vs 3% f’cast, 4.4% prev

GDP Final SalesQ4

1.2% vs — f’cast, 4.5% prev

PCE (y/y) (Dec)

2.9% vs 2.8% f’cast, 2.8% prev

PCE prices (m/m) (Dec)

0.4% vs 0.3% f’cast, 0.2% prev

PCE Prices (Q/Q)Q4

2.9% vs 2.8% f’cast, 2.8% prev

Market Movement Recap

08:49 AM Slightly stronger overnight and a tiny bit of push-back after data. MBS unchanged and 10yr down 1bp at 4.066

10:13 AM Weaker after SCOTUS ruling on tariffs. MBS down 2 ticks (.06) and 10yr up 2bps at 4.097

04:30 PM More than reasonably resilient in the PM hours. MBS now unchanged and 10yr up only 1bp at 4.085

Bonds dictate mortgage rates and bonds experienced a bit of volatility this morning in response to the Supreme Court ruling on tariffs. The initial impact was negative for rates with Treasury yields moving higher and the prices for mortgage-backed securities moving lower. But the reaction was well-contained and bonds ended up erasing most of it by the afternoon. In addition, bonds had improved steadily yesterday, but not so quickly that mortgage lenders updated yesterday’s rate offerings. As such, the average lender had a small cushion to work with today, and it was more than enough to offset this morning’s bond market volatility. All that to say that the average lender actually moved a hair  lower.   The final number is in line with the lowest levels of the week–also the 2nd lowest level of the past 3 years behind January 9th (and not far behind at that). 

If there’s one housing market metric that paints a brighter picture than the rest, it’s New Home Sales data from the Census Bureau. At 745,000, it eased slightly from an upwardly-revised annual rate of 758,000 , but was higher then the pre-revision reading of 737k, and 3.8% above December 2024’s 718,000. Fairly chunky revisions are par for the course with this data. The chart below shows pre-revision numbers (thus the slight uptick with the current release). For-sale inventory fell to 472,000 , down 2.7% from November and 3.5% lower than a year ago. At the current sales pace, that represents a 7.6-month supply , slightly below November’s 7.7 months and down from 8.2 months in December 2024. While supply remains elevated compared to the tightest periods of the past cycle, it continues to trend lower as sales hold firm. Prices moved higher on a monthly basis but showed mixed signals year-over-year. The median sales price rose to $414,400 (+4.2% MoM; -2.0% YoY), while the average price edged up to $532,600 (+0.5% MoM; +4.7% YoY). The divergence suggests a continued tilt toward higher-end transactions lifting the average.
2025 Total Sales: 679,000 (down 1.1% from 2024’s 686,000)
Inventory (YoY): -3.5%
Months’ Supply (YoY): -7.3%
Prior Month Context: November sales were up 15.5% from October’s revised 656,000