Traders have done a reasonably good job of making it back to the office after the 3-day weekend. Volumes are almost in line with last Tuesday (also a day without any big ticket economic data in the morning). On the other hand, last Tuesday’s volumes were the lowest in over a month. 
All that to say: it’s a slow day so far.  As always, lighter participation means that it’s easier for traders to push yields around if there’s a buyer/seller imbalance. Today’s imbalance favored sellers who spent the overnight session following Europe toward higher yields.  The domestic session has been extremely flat, with yields well inside the only semblance of a recent trading range (4.50-4.57 in 10yr yields).

MBS are starting the day down around an eighth of a point (-0-04), as if they were adding a calmer, more linear day of gains onto last Thursday. 

This weekend I spent a little time in the Miami Airport and overheard two people discussing how they were waiting for a builder in Tennessee to finish their home… And hoping rates didn’t go higher. I remained mum. No one knows exactly where rates will go, but I can guarantee you that initial jobless claims for several Thursdays to come will be wonky given government firings. (Lenders are also concerned about the regulatory landscape, and Regulation Central, today at 3PM ET, will explore the whirlwind of leadership turnover at the CFPB, with four directors in just 30 days. As Jonathan McKernan steps in, what direction will the agency take?) In a holiday- and data-light week, investors will be focusing on the January housing data for the U.S., including housing starts on Wednesday and existing home sales on Friday. Zelman reports that, “Unlike 2024, this year’s spring selling season is not off to an early start. While both homebuilder sentiment and orders demonstrated a modest seasonal uplift in January, the magnitude of this increase was underwhelming, representing the smallest January increase recorded in our survey history across both metrics.” (Today’s podcast can be found here and this week’s is sponsored by nCino. nCino Mortgage Suite’s three core products, nCino Mortgage, nCino Incentive Compensation, and nCino Mortgage Analytics, unite the people, systems, and stages of the mortgage process. Hear an interview with Rocket’s Bill Emerson on leading both individuals and a company through the digital age of mortgage.)

The Trump administration has installed Jeffrey Clark at the Consumer Financial Protection Bureau. Clark, a former environmental lawyer in the Justice Department in the first Trump administration, was indicted as part of the president’s efforts to overturn the 2020 election.

Fannie Mae set aside $752 million for credit losses in its apartment complex lending business in part because of fraud or suspected fraud, denting profits amid an industrywide scrutiny of borrowers.

Sean Desmond, the new CEO of nCino, hinted at some of the products under development in an interview with American Banker.

U.S. District Judge Amy Berman Jackson agreed to temporarily block the Trump administration from firing more CPFB employees and said the White House could not delete or destroy any of the bureau’s data or databases.

At the same time builders and lenders report contracting credit on offer, sentiment in the residential construction industry improved in the latter half of 2024.

The Community Home Lenders of America wants streamlined regulations for smaller independent mortgage bankers from the Bureau, including on compensation.

In this week’s update on mortgage applications from the Mortgage Bankers Association (MBA), purchases continued a modest retreat but refinance demand improved for the 2nd week in a row. This was just barely enough for the Refi index to hit the highest levels since October 2024. The uptick makes sense in light of the mortgage rate situation last week.  Rates had been inching slowly to the lowest levels in almost 2 months as of Monday morning. Wednesday brought a a noticeable drop and there wasn’t much of a bounce for the rest of the week. As has been and continues to be the case, all of the volatility seen in the past year represents only a fraction of the longer-term range. Here’s the same refi index over a longer time frame. The purchase side of the market is typically never as responsive to rates in the short term, and last week was no exception. MBA’s purchase app index moved down for the 3rd week in a row, although it’s still closer to the top of the recent range. In the bigger picture, purchase applications suffer from the same jarring adjustment experienced across the housing market with the epic rate spike in 2022. Here’s a breakdown of this week versus last week in several categories of loans in terms of market share:
Refinances

40.2 vs 39.0

FHA Loans

16.0 vs 16.2

VA Loans

14.6 vs 13.3

Survey respondents had 30yr fixed rates at 6.95 with 0.64 points, down slightly from 6.97 in the previous week.  Jumbo loans were down to 6.96 from 7.01 and ARM rates moved up to 6.20 from 6.07.

The final two days of the present week weren’t on many bingo cards as of Wednesday afternoon.  At the time, rates were jumping higher in response to inflation data.  That same morning, the Consumer Price Index (CPI) showed consumer inflation accelerating much faster than expected last month.  As we discussed yesterday, the Producer Price Index (PPI) helped rates completely reverse Wednesday’s jump because of its implications for lower PCE inflation (different than CPI/PPI, and also the Fed’s favorite) in 2 weeks. Now today, we have a more straightforward example of economic data helping rates with Retail Sales coming in MUCH lower than expected. All else equal, weaker data = lower rates and that was plain to see in this morning’s market movement.  The net effect is a move to the lowest 30yr fixed rate index in nearly 2 months. Bond markets (and thus mortgage lenders’ ability to publish new rates) will be closed on Monday for the holiday.