It was a short day for the bond market that underlies mortgage rates, but a good one. A side effect of holiday weeks and early market closures is a bit of random volatility without any obvious justification. When volume and participation are low, bonds can move a bit more than they otherwise might. All that to say today’s improvement was luck of the draw, but we won’t object to the result. The average top tier 30yr fixed rate fell to the lowest level since November 25th. The caveat is that the range has been fairly narrow during that time. [thirtyyearmortgagerates]

Decent Gains With Some Help From 7yr Auction

You know it’s a holiday with an early closure if we’re talking about a 7yr Treasury auction having an impact on the bond market. To be fair, 7s have had an impact once or twice in the past, but the bar is certainly high. The holiday calendar makes the bar a bit lower as fewer determined traders are required to move the whole pile. Such was the case after the 11:30am ET auction. Bonds were already in good shape before that, but the earlier gains were more incidental than data-driven.

Econ Data / Events

Continued Claims (Dec)/13

1,923K vs — f’cast, 1897K prev

Jobless Claims (Dec)/20

214K vs 223K f’cast, 224K prev

Market Movement Recap

08:31 AM Unchanged overnight and no reaction to claims data.  MBS unchanged and 10yr down 1/10th of a bp at 4.165

While many government employees have the day off today and Friday, these are not new, official Federal Holidays. As such, the bond market is open on the same schedule as always. Incidentally, that’s an early close (2pm ET) on the 24th and a full close on the 25th. This assumes both are weekdays. Official holiday trading hour recommendations are published by SIFMA.  Trading is off to an uneventful start with a robotically sideways overnight session and no reaction to Jobless Claims (the day’s only econ data). There is also a 7yr Treasury auction at 11:30am ET, but most human traders will be done making new trading decisions long before then (as in yesterday).

In terms of claims data, 2025 continues running just barely above 2024, but not in a way that suggests any dire concern about the labor market. In fact, the gap has tightened up a bit over the past 2 months (i.e. black line is closer to yellow line).

The president’s latest commentary comes as he is looking to new leadership at the Fed to help reduce borrowing costs, as he increasingly feels political pressure to address voter concerns over affordability.

The regulator lowered benchmarks for acquisitions of certain single-family loans including low-income refinances, and left multifamily targets intact.

A group of 22 Democratic state attorneys general filed a lawsuit against acting Consumer Financial Protection Bureau Director Russell Vought, the bureau and the Federal Reserve, arguing that the administration’s position that the CFPB cannot be funded is wrong.

The announcement follows Realpha’s two previous mergers with mortgage brokerages, as well as its purchases of AI firms and title businesses.

Three US senators opened an inquiry into insurance ratings firm Demotech and whether its assessments may be exposing Fannie Mae and Freddie Mac to growing risks tied to climate-driven insurer failures.

Stunning Display of Holiday Trading Weirdness

GDP for Q3 may be ancient history as far as econ data goes, but markets didn’t seem to think so in the hour following this morning’s release. GDP was much stronger than expected and bonds traded it like it was a legit market mover. But most of the reaction was a holiday-induced amplification of what might have otherwise only caused barely-noticeable weakness in bonds. That point was driven home by the end of the day as both Treasuries and MBS returned to unchanged levels.  

Econ Data / Events

ADP Employment Change Weekly

11.5K vs — f’cast, 16.25K prev

Core CapEx (Oct)

0.5% vs — f’cast, 0.9% prev

Core PCE Prices QoQQ3

2.90% vs 2.9% f’cast, 2.6% prev

Corporate profitsQ3

4.4% vs — f’cast, 0.2% prev

Durable goods (Oct)

-2.2% vs -1.5% f’cast, 0.5% prev

Industrial Production (Oct)

-0.1% vs 0.1% f’cast, 0.1% prev

Industrial Production (Nov)

0.2% vs — f’cast, -0.1% prev

CB Consumer Confidence (Dec)

89.1 vs 91 f’cast, 88.7 prev

Market Movement Recap

08:35 AM MBS are now down 1-2 ticks (.03-0.06) and 10yr yields are up roughly 1bp at 4.169

11:46 AM Bonds sold off a bit more after the last update, but are now back to similar levels with MBS down 2 ticks (.06) and 10yr up 1.1 bps at 4.17

02:00 PM Sideways since last update. MBS down 2 ticks (.06) and 10yr up 0.7bps at 4.167

We’ve spent the past several days reiterating and lamenting the onset of the holiday trading doldrums–a time of year that sees vastly lower volumes/liquidity/participation, and thus runs the risk of volatility that’s more random and larger than it otherwise would be. Now this morning, GDP came in much higher than expected and bonds are selling off somewhat sharply. Rather than fly in the face of the holiday trading environment realities, this is actually a prime example. The best evidence for this is the discrepancy between the size of the movement in bonds and the associated volume. Simply put, the movement in bonds is much larger than the reactions to NFP (jobs report) or CPI, but the volume isn’t even close to half the size.

It is natural to be skeptical of our dismissive tone this morning.  After all, GDP sounds like a big, important report, and a sharp sell-off seems logical given the 4.3% vs 3.3% result.  But the underlying details suggest it was simply “fairly strong” as opposed to a true barn burner (thinking of things like “real final sales to domestic purchasers” at 2.9%, and the 4 quarter avg GDP moving up only modestly in the mid-2% range, and a negative reading in cyclical GDP components). 
Bottom line: if these numbers were coming out during a more actively traded time of year, they may not be having as much of an impact.  But as it stands during the holiday doldrums, 10yr yields are pushing the ceiling of the 4 month range and MBS are down almost a quarter point.