The size of typical bulk MSR deals trading has shrunk, according to panelists at the Mortgage Bankers Association’s Secondary and Capital Markets Conference.

Discrepancies between servicer and investor systems have been rare recently but the dollar amounts involved magnify the impact, according to PMSI’s CEO.

Ultimately Sort of Flat if You Use Your Imagination

Here’s a quick and easy method for imagining that bonds were flat today. Step one, go back to yesterday and use 3pm as a closing time (not a crazy request considering that’s the traditional end-of-day marking time for Treasuries). Then do the same for today. The result is that 10yr yields are up about half a bp. Feel free to round that down to 0bps, and voila! Flat day.  That assessment actually fits better with the calendar and the general vibe. AM volatility came and went surrounding budget headlines and bonds are once again flirting with 4.5% 10yr yields on a holiday-shortened, mostly data-free week, waiting for the next shoe to drop.

Market Movement Recap

10:47 AM Modestly weaker overnight with additional selling in the first 2 hours.  MBS down 5 ticks (.16) and 10yr up 4.2bps at 4.492

01:53 PM Decent recovery with MBS down only 3 ticks (.09) and 10yr up 2.7bps at 4.478

04:47 PM Heading out in moderately weaker territory, but in line with y’day’s mid day levels. MBS down 6 ticks (.16) and 10yr up 3.3bs at 4.483

Rocket Companies and Redfin argue in court filings that a lawsuit seeking to delay their merger is motivated by the plaintiff’s personal gain, not concern for investors.

Leaders of the government mortgage programs suggest they’re back to business as usual following the Trump administration’s initial disruption.

The Federal Housing Finance Agency chief also explained an alternate name he’s used for the agency in his first speech at a Mortgage Bankers Association event.

The Consumer Financial Protection Bureau has withdrawn guidance that allowed states to bring enforcement actions broadly under federal consumer protection laws.

Despite data pointing to overall health, concerns about the direction of the economy are raised among consumers, businesses and investors alike, the Fed governor said.

Mortgage rates jumped sharply over the weekend as financial markets reacted to Moody’s credit rating downgrade of the U.S.  News of the downgrade broke with only minutes left in Friday’s market/business day, so most of the response played out when global markets opened again late last night. The initial reaction involved stock prices moving lower and bond yields moving higher (which can also be characterized as bond market weakness/losses/etc). In general, bond market weakness coincides with higher mortgage rates and this morning was no exception.  Most mortgage lenders are deciding on rates for the day in the 9am-10am ET time frame.  Because this was one of the weakest moments for the bond market, mortgage rates were sharply higher at first. The average lender was back over 7% for the 1st time since April 11th, and only the 2nd time in 3 months. No sooner were these rates being published than the underlying market began moving back in the other direction. Mortgage lenders prefer to only set rates once per day, but will make mid-day updates when things change enough. Today’s reversal was more than sufficient to prompt a re-price. After that, the average top tier 30yr fixed rate moved just barely back below 7.0%–still higher than Friday, but much more in line with last week’s range.

(Un)Surprising Reversal After Initial Weakness

The sharp overnight losses in stocks and bonds were consistent with a market that didn’t have time to process the sort of knee-jerk reaction one would expect from headlines like Moody’s US credit rating downgrade. Most of the rest of the domestic session was consistent with the type of reversal one might expect after a knee-jerk reaction to news that wasn’t really that newsworthy. As has been exhaustively covered, 2 of the other big 3 ratings agencies had long since taken the US credit rating down a peg, thus limiting the true significance of Friday’s news. Bonds ended the day weaker than they were at 3pm last Friday (before the Moody’s news), but slightly stronger vs the 5pm levels (15 minutes after the Moody’s news).

Market Movement Recap

08:36 AM Sharply weaker overnight as Moody’s reaction extends overseas.  MBS down 3/8ths and 10yr up 7.3bps at 4.552

10:48 AM Making progress after sellers got their fill.  MBS down only an eighth and 10yr up only 2bps at 4.5

02:01 PM Now moving into positive territory with MBS up 1 tick (.03) and 10yr roughly unchanged at 4.481