A measure of housing market conditions from the National Association of Home Builders and Wells Fargo increased for a second straight month in October.

The Dallas bank has spent the last three years building itself into a new company. Now, it has to prove the investments will pay off.

The Cleveland-based bank took a hit from a large bond sale, leading to a quarterly loss. But net interest income rose, and the company expects that metric to hit a key milestone in the fourth quarter.

The Buffalo, New York-based bank said its commercial real estate portfolio continued to shrink, but this was more than offset by business and consumer lending.

The North Carolina-based company expects its revenue to outpace expenses next year — a goal that has proven elusive over the five years of Truist’s existence.

Fairly Big Sell-Off, But Last Week’s Range is Intact

Bonds dealt with a trifecta of unfriendly economic data today with slightly stronger Retail Sales leading the charge.  Jobless claims and Philly Fed certainly didn’t help.  In the desert of data that exists between each month’s jobs reports, only a handful of days stand out as potential sources of course correction.  Today was one of them and the 8bp sell-off in 10yr yields confirms it.  Despite that reasonably big jump, yields are still under last week’s highs.  That’s a decent consolation prize–one that suggests the market will remain willing to rally if it sees cracks in the next round of relevant data.

Econ Data / Events

Philly Fed

10.3 vs 3.0 f’cast

Retail Sales

0.4 vs 0.3 f’cast

Jobless Claims

241k vs 260k f’cast

Industrial Production

-0.3 vs -0.2 f’cast, 0.3 prev

Builder Confidence

43 vs 42 f’cast, 41 prev

Market Movement Recap

08:52 AM modestly weaker overnight with additional losses after data.  MBS down 6 ticks (.19).  10yr up 5.3bps at 4.067

10:34 AM Slowly and steadily weaker.  MBS down 10 ticks (.31) and 10yr up 7.4bps at 4.088

02:55 PM Treading water at weakest levels.  MBS down just over 3/8ths and 10yr up 8.1bps at 4.095

Mortgage rates are driven by the bond market and bonds consistently take cues from economic data.  Traders have been waiting on this Thursday’s economic data ever since last Thursday, largely because there haven’t been any major reports between now and then. The market constantly tries to adjust based on whatever it thinks it can know ahead of time.  That means that the median forecast among hundreds of economists for any given report tends to be reflected in the bond market well before the report in question is released.  Then on release day, the market reacts to deviations from the consensus. In today’s case, all 3 of this morning’s key reports were stronger than expected.  
Jobless Claims dropped to 241k for the week.  Both last week’s level and this week’s forecasts were 260k.
The Philly Fed Business Outlook Survey came in at 10.3 versus a median forecast of 3.0 and a previous reading of 1.7.
Retail Sales rose 0.4% vs a 0.3% forecast and 0.1% in the last report.
Immediately following the release of the data (all 3 hit at 8:30am ET), the bond market lost ground.  That means bond prices fell and yields (aka “rates”) rose.  Mortgage lenders then base their rates for the day on the trading levels in the bond market.  Unsurprisingly, that meant the average lender moved back near their highest recent levels for a top tier conventional 30yr fixed scenario. The silver lining is that rates are still technically in the same range seen over the past week and a half, but that range is quite a bit higher than September’s.  

Today would have been the 65th birthday of comedian Norm Macdonald. And while that may make your head shake, here’s something else that definitely will: Hurricane Milton will result in an estimated $36 billion in insurance claims due to damage from wind, storm surges, and flooding, following Hurricane Helene’s $19 billion. For those without an HP-12C, that’s $55 billion. No, I don’t know, compared to that cost, how much insurance companies earned in premiums in those areas since the last loss. Making money, spending money… To make more money in lending, or even survive, you need to figure out where the money is being spent. Freddie Mac has a report on the cost to originate that you should either skim through or print and read. Speaking of Freddie, the ex-head of the FHFA is being interviewed today, and you can bet that he’ll be talking about possible election-related Agency moves. Mark Calabria is the former director of the Federal Housing Finance Agency, which regulates and supervises Fannie Mae, Freddie Mac, and the Federal Home Loan Banks. He laid the groundwork for a removal of Fannie Mae and Freddie Mac from government conservatorship. (Today’s podcast can be found here, and this week’s is sponsored by Aidium. Your leads are showing signs of intent to buy or refinance a home far before traditional triggers like pulling credit. Aidium’s AI Lead Prioritization helps you sift through bad leads and focus on the ones that are ready to transact. Spend your time where it matters most with Aidium. Hear an interview with Tavant’s Sundeep Mathur on providing AI-powered tools that build better borrowers by enabling and empowering consumers with the knowledge, tools, and data needed to make sound financial decisions.)

Ever since last Thursday’s econ data failed to cause a stir in financial markets, we knew we’d be waiting until today for big, data-driven volatility potential.  Volatility goes both ways depending on the tone of the data.  Unfortunately for bonds, all three of this morning’s economic reports were stronger than expected.  The resulting move in bonds has been logical and unpleasant with yields quickly moving back toward last week’s highs.  Perhaps it’s some small victory that yields remain several bps below those highs, or simply an indication that this is only bush league data compared to the jobs report.

The share of homes constructed in community associations rose for the first time in three years in 2023, the National Association of Home Builders reported.