Here in San Diego at the CU:REALM event, Cotality’s Chief Economist Dr. Selma Hepp noted that consumer and business sentiment has already dropped and that has led to less spending. Less spending leads to a slower economy and lower rates, which is good, but nervousness has crept into consumer’s thinking and, given that 70 percent of U.S. GDP comes from the consumer, estimates of improving gross domestic product have vanished. Yet Cotality believes 30-year mortgage rates will chop around the 6 percent range this year and next. Another impact that the Trump Administration is having on lenders is in the regulatory arena. On today’s Regulation Central the panel of legal and regulatory experts is joined by former CFPB attorney Richard Horn. The recent filing by the CFPB to unwind the Townstone consent order has raised a lot of eyebrows and questions about fair lending enforcement going forward. Mr. Horn was one of the attorneys that represented Townstone. Other topics will include the state of fair lending, Townstone, and what in the heck are those CFPB people doing now. (Today’s podcast can be found here and this week’s are sponsored by BeSmartee, transforming mortgage lending with Bright Connect, its native mobile app designed to boost loan officer productivity, speed up referrals, and simplify the borrower experience. Interview with BeSmartee’s Tim Nguyen on how evolving economic pressures, borrower expectations, and advances in AI are reshaping point-of-sale solutions, redefining the role of loan officers, and unlocking new opportunities to streamline the mortgage experience.)

In the context of the past two weeks, the past two days have been an anomaly. Not only have bond yields been moving lower, but they’ve done so in relatively lower volatility and without the same sort of high-impact headlines seen with last week’s 90 day tariff pause. The market is moving into a more uncertain, inquisitive position now that we’re through the initial barrage of tariff-related volatility.  What will the final numbers be? What countries will be involved? What will “deals” look like? What will be exempted? And lastly, what will the international response be to all of the above?  Short of a rapid re-acceleration of tariff drama, we’re in “wait and see” mode with a focus on the questions outlined above.

While not directly correlated to bond market movement, currency valuation has been a good proxy for the global market response to April 2nd and the subsequent updates.  In the chart below, lower = weaker for the dollar.

Bessent reiterated his interpretation of the decline being mainly a product of deleveraging, saying he had no evidence that sovereigns were behind the drop.

The re-engineering of the convertible note arrangement between the two parties includes a one-time cash payment of $110 million by Better.

Federal Reserve Board member Christopher Waller said he would not be deterred from classifying inflation as “transitory” despite the board’s recent experience underestimating inflationary pressures.

Omeed Malik, who runs a merchant bank and a hedge fund, is a Republican donor and works with Republican-linked businessmen including Donald Trump Jr.

The Buffalo, New York-based bank also said Monday that the commercial real estate lending market has started showing signs of life, but that the renewed competition is crimping its loan growth.

Bonds Build on Overnight Gains After Another Tariff Change

It was a low drama session for bonds with overnight gains managing to remain intact during the AM hours and additional improvement in the PM hours. There wasn’t any glaringly obvious individual market mover during domestic hours, although some would say comments from Fed’s Waller certainly didn’t hurt. Rather, we saw consistent, moderate, generalized buying demand as traders need not price in as much panic as last week if the tariff outlook is becoming progressively less onerous. Whether this is a brief reprieve remains to be seen.  And we may have to wait a bit longer to sort that out considering there are only 2.5 more days left to trade this week due to the holiday calendar. 

Econ Data / Events

NY Fed Inflation Expectations

1yr : 3.6 vs 3.1 prev
3yr: 3.0 vs 3.0 prev

Market Movement Recap

09:41 AM Stronger overnight on electronic tariff exemptions.  MBS up half a point and 10yr down 9.2bps at 4.058

11:04 AM Modest additional gains after NY Fed inflation data.  MBS up 13 ticks (.41).  10yr down 10bps at 4.05

01:20 PM Best levels of the day in Treasuries.  10yr down 11.7bps at 4.033.  MBS up 12 ticks (3/8ths). 

03:26 PM Just a bit stronger.  MBS up just over 5/8ths and 10yr down 11.8bps at 4.373

Last Friday was notable in that it was the first day since February 19th where the average top tier 30yr fixed mortgage rate ended the day over 7%. Last week was also notable for ranking among the more abrupt weeks for rising rates over the past few years. Things are getting off to a friendlier start in the present week with the 30yr fixed rate index edging back below 7%–roughly in line with levels seen last Wed/Thu.   As is true for most markets at the moment, the bond market (which underlies mortgage rate movement) continues a general pattern of reacting to developments on tariffs and fiscal policy. Friday evening’s updates on tariff exclusions for certain tech-related imports helped bonds set up for today’s lower rates.   Despite the improvements today, rates remain at risk of higher potential volatility as fiscal details continue coming into focus. 

“Why don’t you tell rumors in a Botox Clinic? Nobody raises an eyebrow.” Who can keep track of the rumors out there, like a combo of a well-known real estate search engine and a company that exited wholesale a few years ago? (Totally unsubstantiated, unlike the actual Luminate/NJ Lenders news below!) Who can keep track of thousands of products from hundreds of countries to tax them? In yet another change, smartphones, computers, and other electronics are exempt from Trump’s reciprocal tariffs, for now. It’s difficult hedging a mortgage pipeline; try being a purchasing manager for a car maker! Or a homebuyer or builder: Canada and Mexico, respectively, are important sources of softwood lumber and gypsum (used in drywall). China is an important source of steel and aluminum, as well as a supplier of home appliances and other products used in residential construction. Many of the raw materials and goods sourced from China are already subject to tariffs. It is important to note that Canada, Mexico, and China are the United States’ three largest trading partners. Economists at the National Association of Home Builders (NAHB) project that the proposed new tariffs on Mexico and Canada, along with the recently imposed tariffs on China, could raise the cost of imported construction materials by more than $3 billion. (Today’s podcast can be found here and this week’s are sponsored by BeSmartee, transforming mortgage lending with Bright Connect, its native mobile app designed to boost loan officer productivity, speed up referrals, and simplify the borrower experience. Hear an interview with TrustEngine’s Dave Savage on the evolution of the industry since he entered more than three decades ago, how he’s driven to make an impact, and more tidbits from one of the most recognizable names in mortgage that you won’t want to miss.)