Modest, Incidental Victory

Bonds closed with MBS in line with their best levels of the day, up an eighth of a point. 10yr yields fell just under 1bp to 4.264. 2yr yields did better, shedding just over 4bps and extending their gap vs 10yr yields to the widest levels since the volatile days in early April. The AM news cycle credited the news of Trump firing the Fed’s Lisa Cook for this “steepening” (a steeper slope between 2 and 10yr yields). Indeed, it may have contributed, but it’s debatable whether this level of movement in the curve actually matters.  2s vs 10s have been holding a tight range since April with few days falling outside a range of 0.45 to 0.57. In the bigger picture, bonds are still counting the hours until next Friday’s jobs report. 

Econ Data / Events

Durable Goods

-2.8 vs -4.0 f’cast, -9.3 prev

Core Durable Goods

1.1 vs 0.2 f’cast, -0.7 prev

CaseShiller 20 mm nsa (Jun)

0.0% vs — f’cast, 0.4% prev

FHFA Home Price Index m/m (Jun)

-0.2% vs 0% f’cast, -0.2% prev

FHFA Home Prices y/y (Jun)

2.6% vs — f’cast, 2.8% prev

Market Movement Recap

08:37 AM roughly unchanged overnight and mostly holding in early trading. MBS up 1 tick (.03) and 10yr up less than 1bp at 4.278

01:19 PM Strong 2yr auction but bonds were already gaining ground before that.  10yr now down 1.3bps at 4.259.  MBS up 3 ticks (.09)

05:23 PM Bonds closed with MBS in line with their best levels, up an eighth of a point.  10yr yields fell just under 1bp to 4.264. 

There are some “big-hitters” in the mortgage, finance, and housing world who will tell you that the Trump Administration’s plan to sell shares in Fannie Mae and Freddie Mac could drive up the mortgage rates that Americans pay. Shareholders want a return. Others will counter that the time has come to remove them from conservatorship, regardless. It’s time to “pull off the bandage” quickly. Either way, mortgage industry observers are wondering about the fate of Fannie and Freddie in the wake of statements from the President and FHFA Director Pulte about a GSE IPO and combining the two housing finance agencies into one “Great American Mortgage Company.” Mortgage Musings author and attorney Brian Levy weighs in with his unique perspective on this in his latest edition, Corruption and the Great American Mortgage Company. Sign up to receive the Mortgage Musings at www.blevy.substack.com or it can be found on the Chrisman Commentary Thought Leadership page.“ Speaking of the Agencies, if you are looking to obtain a FNMA seller/servicer approval or have an internal title insurer vetting process that requires you to maintain risk information on title insurers, Secure Insight offers risk profiles on national and regional insurers which include independent financial stability ratings. Contact Amanda Padd or visit Secure Insight. And for what should be a fantastic discussion on the future of mortgage workflows and how the industry could consolidate as it moves toward a marketplace (a la car insurance shopping or flight searches), tune into Mortgages With Millennials, today at 10a PT/1p ET, when Robbie sits down with Porchlight’s David Wells and Pylon Lending’s Trent Hedge for a discussion on bringing underwriting to the point of search. (Today’s podcast can be found here and this week’s is sponsored by Arrive Home. Arrive Home helps mortgage lenders connect creditworthy buyers with down payment assistance and affordable homeownership solutions, offering tools that empower lenders and uplift communities. Hear an interview with Arrive Home’s Shawn King on how downpayment assistance is helping millions of Americans build generational wealth.)

Focusing only production MBS coupons and longer-term Treasuries, the bond market is off to another slow, sideways start today with minimal change versus yesterday.  With all of this morning’s data now reported, we’ve seen no measurable impact on bonds.  The overnight session was a different story but not due to econ data.  Rather, bonds responded to Trump’s firing of Fed Governor Cook (a process that is more complicated than it sounds) with a steepening of the yield curve (2yr yields moved lower versus 10yr yields). The steepening is consistent with the view that Cook’s replacement would be that much more supportive of an aggressive rate cut outlook (2yr Treasuries have more in common with the Fed Funds Rate than 10yr Treasuries). This isn’t a major shift in the bigger picture and it remains to be seen how Cook’s firing will actually play out.

Bank industry advocates, housing groups and CRA veterans say the rule is overly complexity and burdensome, but even they agree pre-approving CRA-eligible activities was a good idea.

A Redfin survey found that no matter what age demographic, owners are in a better situation to make their payments compared to renters.

Contract signings on new single-family homes ticked down to a 652,000 annualized rate, with the strongest demand in the West, according to a government report issued Monday.

Digital mortgage tools are changing the way lenders operate. These five industry-driven trends are shaping speed, compliance, and borrower expectations in 2025.

As the CFPB reconsiders LO comp rules, tech remains key to retention and performance, according to the Head of Customer Experience & Operations at Floify.

After last week’s Jackson Hole speech from Fed Chair Powell, rates fell to their lowest levels since October 3rd, 2024, narrowly surpassing the recent long-term low seen on August 13th. Powell tacitly suggested a stronger possibility of a September Fed rate cut due to growing concerns about the labor market. Now today, the market corrected mildly back in the other direction.  The average lender’s conventional 30yr fixed rates moved back up ever-so-slightly (roughly 0.02%), but remain essentially in line with 10-month lows.  It always bears repeating that mortgage rates have much more in common with Fed rate EXPECTATIONS in the marketplace than with the Fed Funds Rate itself. Specifically, if expectations for rate cuts are increasing, mortgage rates tend to fall at the same time. The catch is that by the time the Fed ultimately holds its scheduled meeting and cuts rates, the market has long since priced that likelihood into prevailing levels. Thus, the actual Fed rate cut does little or nothing else to influence rates and the next wave of momentum takes cues from subsequent economic reports and developments.  Bottom line: the Fed Funds Rate is a battleship in a river whereas mortgage rates are far more nimble.

Fairly Quiet Monday Considering Last Week’s Noise

In last week’s defense, it really wasn’t that noisy, but Friday’s Jackson Hole speech and subsequent bond rally made it seem like big things were happening. In actuality, bonds were simply getting back in line with the prevailing range that was carved out after the last jobs report and we’ll probably be waiting for the next jobs report before that range is meaningfully challenged.  Between now and then, what do you do if you’re the bond market?  Answer: have days like today with minimal movement and highs/lows that were easily contained by Friday’s range (what traders refer to as “an inside day”). 

Econ Data / Events

New Home Sales 

652k vs 630k f’cast, 656k prev

Market Movement Recap

10:12 AM moderately weaker overnight and little-changed so far.  MBS down an eighth and 10yr up 2.9bps at 4.29

01:10 PM mid day gains.  MBS unchanged and 10yr up less than 1bp at 4.269

03:57 PM Heading out at just slightly weaker levels. MBS down 2 ticks (.06) and 10yr yield up 2bps at 4.28