Bonds Scratch Out a Win Amid Dueling Headlines

Bonds remain surprisingly willing to react to the most seemingly insignificant war-related headlines. Today it was the much-debated geographical location of Pakistan’s lead negotiator, Asim Munir, that set the tone. Bonds rallied on early accounts that he was en route to Tehran and pulled back when other headlines suggested he never left Pakistan. Ultimately, yields trickled just barely into positive territory by the end of the holiday-shortened session. Monday is fully closed for Memorial Day and we’re back to watching the news feed on Tuesday.

Econ Data / Events

CB Leading Index MoM (Apr)

0.1% vs -0.2% f’cast, -0.6% prev

Consumer Sentiment (May)

44.8 vs 48.2 f’cast, 49.8 prev

Sentiment: 1y Inflation (May)

4.8% vs 4.5% f’cast, 4.7% prev

Sentiment: 5y Inflation (May)

3.9% vs 3.4% f’cast, 3.5% prev

U Mich conditions (May)

45.8 vs 47.9 f’cast, 52.5 prev

Market Movement Recap

08:41 AM Modestly stronger overnight with some additional gains after early peace talk headlines. MBS up an eighth and 10yr down 2.2bps at 4.547

10:09 AM MBS now up only 1 tick (.03) and down 7 ticks (.22) from the AM highs. 10yr up 0.4bps at 4.572 after briefly trading below 4.53.

12:48 PM After being down almost an eighth, MBS are back to being up 1 tick (.03) and 10yr yields back to unchanged after being about 1bp higher.

Builder confidence improved modestly in May, though sentiment remained subdued as elevated mortgage rates, affordability pressures, and broader economic uncertainty continued to weigh on the housing market. The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) increased three points to 37 . While the gain marks a slight rebound from April’s decline, the index is still sitting below the threshold that signals broader builder optimism. All three major components of the index moved higher in May. The gauge measuring current sales conditions rose three points to 40 , while the index tracking future sales expectations increased three points to 45 . The component measuring prospective buyer traffic also climbed three points to 25 , suggesting some buyers who had previously remained on the sidelines moved forward this spring. “The housing market remains soft as higher mortgage rates, rising gas prices and economic uncertainty related to the war in Iran continue to dampen buyer demand,” said NAHB Chairman Bill Owens. He added that ongoing efforts in Congress to modify the 21st Century ROAD to Housing Act could help increase housing supply and ease builder concerns. NAHB Chief Economist Robert Dietz said recent increases in long-term interest rates are likely to continue limiting buyer activity. He also noted that while some regional markets are showing relative strength, affordability challenges remain a significant obstacle for the broader housing market.

Mortgage applications pulled back last week as rising rates weighed on homebuyer demand, while refinance activity remained largely flat. The Mortgage Bankers Association (MBA) reported a 2.3% decrease in total application volume on a seasonally adjusted basis for the week ending May 15. The decline was driven primarily by softer purchase activity. The seasonally adjusted Purchase Index fell 4% from the prior week, though purchase demand remained 8% higher than the same week one year ago. Refinance activity was mostly unchanged despite the rise in rates. The Refinance Index dipped just 0.1% week over week but remained 35% above year-ago levels. The average 30-year fixed mortgage rate increased to 6.56% from 6.46%, reaching its highest level in seven weeks. According to MBA, concerns surrounding inflation, higher fuel costs, and growing worries over global public debt helped push Treasury yields — and mortgage rates — higher during the week. MBA’s Joel Kan said, ” Overall applications were down to the lowest level in five weeks as purchase borrowers pulled back across conventional and government loan types. Refinance applications were essentially unchanged, with a decline in government refinances and an increase in conventional refinancing, likely as the increase in rates came late in the week. ” Kan also noted that adjustable-rate mortgages gained traction as borrowers looked for lower-rate alternatives. ARM loans accounted for nearly 10% of total applications, the highest share since October 2025, with the average ARM rate sitting roughly 80 basis points below the 30-year fixed rate.

The pace of contract signings surged at its fastest in three years in a break from the more stagnant conditions of past home buying seasons, Realtor.com said.

VantageScore 4.0 has been incorporated into the existing processes at Rocket for both the retail and mortgage broker-facing origination businesses.

Copper Ridge Ventures has joint venture businesses with mortgage loan officers and real estate professionals using the same broker model as NEXA Lending.

Starts of single-family homes declined 9%, the most since August, according to government figures released Thursday.

With the 10-year Treasury yield at levels not seen in 52 weeks, the 30-year fixed rate mortgage rose 15 basis points over last Thursday, Freddie Mac said.

Peace Deal Rumors Make For Mid-Day Reversal

Bonds started the day in fairly forgettable and slightly weaker fashion after overnight headlines suggested that the disposition of Iran’s nuclear material remains a sticking point. Bonds were flat at weaker levels all morning. Then, just after 1pm, a different headline suggested a “draft agreement” was expected to be announced in a matter of hours. It listed several bullet points, but ironically, nuclear material was not on the list. Nonetheless, the bond market rallied into positive territory rather easily. As much of a head-scratcher as that is (why get excited if the nuclear sticking point remains?), there’s no question about the reaction function with oil prices perfectly matching the bond yield move.

Econ Data / Events

Building Permits (Apr)

1.442M vs 1.39M f’cast, 1.363M prev

Continued Claims (May)/09

1,782K vs 1790K f’cast, 1782K prev

Housing starts number mm (Apr)

1.465M vs 1.41M f’cast, 1.502M prev

Jobless Claims (May)/16

209K vs 210K f’cast, 211K prev

Philly Fed Business Index (May)

-0.4 vs 18 f’cast, 26.7 prev

Philly Fed Prices Paid (May)

47.90 vs — f’cast, 59.30 prev

Market Movement Recap

08:31 AM Weaker overnight as Iran says it’s keeping nuclear material. MBS down a quarter point and 10yr up 3.2bps at 4.62

12:26 PM Fairly flat at modestly weaker levels. MBS down 3 ticks (.09) and 10yr up 1bp at 4.598

01:17 PM Rallying on Iran peace agreement rumors. MBS up 3 ticks (.09) and 10yr down 1.4bps at 4.575

02:29 PM Rally continues on peace deal news. MBS up more than a quarter point and 10yr down 3.2bps at 4.556

02:59 PM most recent newswires pushing back on previous, optimistic news. 10yr back near unchanged levels at 4.585 and MBS up an eighth (after being up more than a quarter point a short while ago. 

Delinquencies among recent FHA originations are showing up alongside a notable volume of subordinate liens carried by the borrowers.