Mortgage rates reached their highest level of the week on Wednesday and haven’t really moved since then.  Technically each subsequent day saw a microscopic reduction in the average top tier 30yr fixed rate, but the average borrower would likely be seeing the same quote all three days. This flat trajectory contrasts sharply with the first two days of the week.  At the time, Monday and Tuesday were cause for concern as there were no obvious catalysts for that level of movement.  These past 3 days suggest rates are content to wait for the next big motivation from current levels, hopefully. Why “hopefully?”  Because there’s never any way to ensure the future will behave as the present suggests when it comes to financial markets.  So what can we know?  There are a few things. We know that rates moved a lot higher over the past 4 weeks than the average media coverage suggests.  Mainstream weekly surveys only show a spike of about 0.40%.  The actual spike in daily average rates was over 0.70%.   We also know that next week’s jobs report (on Friday) is a huge source of potential volatility, for better or worse.  After that, the election and the Fed announcement can have a major impact the following week.  

Stronger Start, Weaker Finish

Bonds had a fine morning with overnight gains bringing yields in line with the lowest levels of the past few days within the first 2 hours of domestic trading.  From the 9:30am NYSE open on, bonds began moving in the other direction.  There were no individual, new catalysts for the weakness, and more importantly, it wasn’t even a level of weakness that matters in the bigger picture.  Rather, this is the reality for the next few weeks in addition to being the occasional reality on any Friday afternoon after 3pm ET (due to the CME close).  Looking back on the week, the only move that mattered was the sell-off into Wednesday morning.  After that, the unwillingness on the part of 10yr yields to move back below 4.20 means they’ve been sideways ever since.  It’s unpleasant in the moment, but this is nothing compared to what we could see in the coming weeks.

Econ Data / Events

Durable Goods

-0.8 vs -1.0 f’cast, 0.0 prev

Market Movement Recap

08:32 AM Modestly stronger overnight and no major reaction to Durable Goods.  MBS up 2 ticks (.06) and 10yr down half a bp at 4.209.

10:41 AM giving up gains after NYSE Open.  MBS up only 1 tick (.03) and 10yr down .6bps at 4.207

12:33 PM 10yr up 0.4bps at 4.217.  MBS down 5 ticks (.16) from highs, but still near unchanged levels. 

02:30 PM New lows for MBS, down just under an eighth on the day and exactly a quarter point from the highs.  10yr up 1.3bps at 4.226

03:39 PM More new lows for MBS, now down 5 ticks (.16) on the day and 10 ticks (.31) from the highs.  10yr yields are up 2.8bps at 4.241

Granted, we were by no means looking for big things from this morning’s Durable Goods data, but somehow it still managed to underwhelm.  That’s not saying much for Durable Goods considering the core category (which excludes defense spending and aircraft) rose much faster than expected.  If this was a report that mattered, bonds would have weakened in response.  As it stands, there was no reaction in terms of volume, and yields actually moved a bit lower in the next half hour.  The only other data this morning was Consumer Sentiment and it was met with a similar response.  With that, bonds are moving quickly toward the PM hours at effectively unchanged levels. 

The agency filed an appeal to a ruling in August, which decimated its noncompete ban, set to go into effect in September.

California’s Department of Financial Protection and Innovation is requiring registration by mid-February of debt settlement firms, earned wage access providers, private secondary education financing and student debt relief services.

While the recent upward movement has dampened borrowing activity, housing researchers reported encouraging signs for business this fall.

The real estate investment trust and correspondent lender also anticipates improved subservicing costs due to a larger trend in the mortgage market.

The suit claims Fairway Independent Mortgage did not pay its loan officers overtime and failed to reimburse them for work-related expenses.

Mortgage rates have risen every day since October 15th and some of the jumps have been fairly big.  That followed an even bigger increase earlier in the month with the whole ordeal accounting for a 0.72% increase in 30yr fixed rates since October 1st. Today’s trading session offered a break from the recent trend with bonds improving overnight and holding onto those gains long enough for mortgage lenders to improve their offerings by the smallest of margins.  In other words, rates were basically unchanged, but for the hair splitters, technically lower. The movement isn’t the interesting part of the day, however.  Rather, it’s the fact that the morning’s economic data made a case for higher rates and the bond market (bonds dictate rates) was able to stay in stronger territory nonetheless.  Part of that has to do with the data in question.  It’s not on the same level as something like next Friday’s jobs report. But part of it could be a sign that recent upward momentum in rates is starting to fizzle out.

Better Balance, Finally

In the context of the first 3 days of the week, bonds pulled off a miracle today.  Most of the yield curve managed to remain in positive territory despite both of this morning’s key economic reports coming in stronger than expected.  Markets were definitely willing to trade that data as both reports garnered a pop in yields and volumes.  Perhaps it was a saving grace that neither report was unequivocally terrible for bonds.  Both had some “yeah buts” that helped balance the response.  What’s impressive is that bonds were finally willing to have a balanced response as opposed to selling first and asking questions later.  All this having been said, the jury is out as to whether this means anything or was simply the way today’s ball bounced. 

Econ Data / Events

Jobless Claims

227k vs 242k f’cast, 242k prev

Continued Claims

1897k vs 1880k f’cast, 1869k prev

S&P Services PMI

55.3 vs 55.0 f’cast, 55.2 prev

S&P Manuf. PMI

47.8 vs 47.5 f’cast, 47.3 prev

Market Movement Recap

10:03 AM moderately stronger overnight, but weaker after econ data.  MBS still up 1 tick (.03) and 10yr still down 1.5bps at 4.224

11:57 AM Choppy, but broadly sideways and near stronger levels.  MBS up 5 ticks (.16) and 10yr down 3.8bps at 4.201

01:42 PM A bit closer to the day’s best levels.  MBS up 7 ticks (.22) and 10yr down 4.9bps at 4.19

04:15 PM Off the best levels in the after hours session with MBS up only 3 ticks (.09) and 10yr down only 3bps at 4.208