Come on… you don’t believe politics and mortgages are separate? Look at politicized government housing agencies: whoever is running HUD, whether it is Bill Pulte or Scott Turner, posted this note on the website. Wasn’t it just a few weeks ago that all we had in the news were tariffs and Fed Governor Lisa Cook? (By the way, all the living Fed Chairs have come out in favor of Federal Reserve independence and against the firing. And mortgage occupancy fraud involving her and President Trump’s cabinet members? Here’s the latest.) Starting today, the shutdown has necessitated a furlough of certain federal employees and significant curtailment of certain operations requiring agency staff intervention or action at the Department of Housing and Urban Development, Veterans Affairs, and the Department of Agriculture. National Flood Insurance Program (NFIP) authorities have expired today. The MBA continues to advocate for an extension of NFIP’s authority to avoid disruptions to the housing market, including joining other trade groups in a letter to Congressional leadership. (Today’s podcast can be found here and this week’s are sponsored by Spring EQ, one of the nation’s leading non-bank home equity lenders, giving partners more ways to serve customers. Known for speed, service, and innovation, Spring EQ makes tapping into home equity easier. Hear an interview with Spring EQ’s Reno Heine on when and why loan originators should consider HELOC and HELOAN products for clients, key factors in choosing between them, and the future outlook for second mortgages.)

Mortgage rates are based on bonds and bonds take cues from economic data. Employment-related data is particularly important. The monthly jobs report from the Department of Labor is in a league of its own in that regard, and while we won’t get that this week due to the shutdown, this morning brought the release of a similar private sector report.  The ADP Employment report showed the job count dropping by 32k–well short of the forecast for a 50k increase.  In addition, the previous month’s 54k was revised down to -3k. Bonds responded immediately and generally moved back in line with the stronger levels from yesterday morning. As such, mortgage rates were able to start the day right in line with yesterday’s opening levels. The average 30yr fixed rate has been very flat for nearly 2 weeks now. The biggest risk/opportunity for a meaningful change would follow the eventual release of the jobs report, but that date is TBD for now.

Best Closing Levels in More Than a Week, But Still Generally Flat

Short version: bonds have been basically flat ever since the 2-day sell-off 2 weeks ago that followed Fed Day and stronger econ data on Thursday the 18th. 
Slightly longer version: Bonds were unchanged at the open after closing at higher levels yesterday. ADP came out much weaker than expected, prompting a rally that was immediate, but appropriately sized for ADP (i.e. nowhere near as big as it would have been for NFP). ISM Manufacturing was in line with expectations, which was good enough to end the bond rally for the day. Yields retraced half the ADP-inspired gains by noon, but rallied modestly in the PM hours to end the day at the lowest levels since last Tuesday.

Econ Data / Events

ADP Employment 

-32k vs 50k f’cast
last month revised from 54k to -3k

ISM Manufacturing Employment (Sep)

45.3 vs — f’cast, 43.8 prev

ISM Manufacturing PMI (Sep)

49.1 vs 49 f’cast, 48.7 prev

ISM Mfg Prices Paid (Sep)

61.9 vs 63.2 f’cast, 63.7 prev

Market Movement Recap

08:37 AM Stronger after ADP data.  MBS up 5 ticks (.16) and 10yr down 3.9bps at 4.109

10:16 AM Minimal reaction to ISM data, but off the best levels.  10yr down 3.5bps at 4.113 (up from 4.09 lows).  MBS still up 5 ticks (.16) but down 3 ticks (.09) from highs.

01:23 PM Back near best levels in MBS, up a quarter point on the day. 10yr down 3.6bps at 4.113

The massive wholesale lender’s new website stands opposite rival United Wholesale Mortgage’s own originator portal which it launched in 2018.

Fidelity National Financial, with support from the American Land Title Association, is suing to halt enforcement of the anti-money laundering regulation.

Different markets for home equity products emerge, plus technology changes make it easier and quicker for traditional offerings to reach consumers.

In a complaint filed in Virginia federal court, the FTC said the partnership would reduce the number of websites offering apartment listings, leaving consumers with fewer places to search.

The average starter home was sold for more than $206,000 in August, yet sales increased by nearly 4% from last year, according to a Redfin report.

Mortgage rates were just barely lower this morning versus yesterday’s latest levels, but most borrowers won’t see any major difference from any of the past 7 business days. Additionally, some lenders issued mid-day changes, giving rates a slight bump in response to weakness in the bond market. With a government shutdown looking increasingly likely, traders are increasingly less likely to see the latest jobs report, originally scheduled for this Friday. This morning’ econ data isn’t in the same league as the jobs report, but it did provide a modest benefit for rates with job openings remaining low and consumer confidence falling. The bond market weakness in the afternoon was a function of the month/quarter end trading environment which creates market momentum without regard to timely economic data releases.

Gains Erased by Month/Quarter-End Trading

If it’s the last day of a month and especially if it’s also the last day of the quarter, and if bonds are making a move in the second half of the day for no other apparent reason, the default scapegoat is month/quarter-end positioning.  Month-end trading can take a variety of forms ranging from broad asset-allocation trades between stocks and bonds to specific buying/selling of Treasuries to achieve various portfolio goals. This can be as simple as certain accounts no longer needing to hold as many Treasuries after the 3pm marking period. Either way, the selling wasn’t extreme, by any means, but it was enough to erase the gains facilitated by this morning’s weaker econ data.

Econ Data / Events

Case Shiller Home Prices-20 y/y (Jul)

1.8% vs 1.6% f’cast, 2.1% prev

CaseShiller 20 mm nsa (Jul)

-0.3% vs — f’cast, 0.0% prev

FHFA Home Price Index m/m (Jul)

-0.1% vs 0.1% f’cast, -0.2% prev

FHFA Home Prices y/y (Jul)

2.3% vs — f’cast, 2.6% prev

Chicago PMI (Sep)

40.6 vs 43 f’cast, 41.5 prev

CB Consumer Confidence (Sep)

94.2 vs 96 f’cast, 97.4 prev

JOLTs Job Quits (Aug) (lower = better for rates)

3.091M vs — f’cast, 3.208M prev

Job Openings (Aug) (lower=better for rates)

7.227M vs 7.2M f’cast, 7.181M prev

Market Movement Recap

10:42 AM Modestly stronger overnight and some additional buying after data.  MBS up 3 ticks (.09) and 10yr down 2.7bps at 4.112

11:45 AM giving up some gains now.  MBS up 1 tick (.03) on the day and 10yr nearly unchanged at 4.139

02:00 PM weakest levels of the day for MBS, now unchanged and down an eighth from highs.  10yr down half a bp at 4.134

03:26 PM new lows for MBS, down 6 ticks (.19) from the highs and 2 ticks (.06) on the day.  10yr yields are up 1bp at 4.149