At first glance, it looks as if the bond market will make it through Thursday morning without being too worse for the wear.  When the monthly core CPI reading flashed 0.1 higher than expected (0.3 vs 0.2), there were clearly some doubts.  Yields popped higher initially, but milliseconds later, Jobless Claims said “not so fast…” by coming in much higher than forecast (258k vs 230k).  There are some “yeah buts” to be sorted out on that number, but it created enough indecision to prevent a runaway sell-off in the first hour after the data.  MBS are outperforming a bit due to the steeper yield curve (i.e. shorter term bonds doing better than longer term bonds, and MBS act more like short term bonds these days).

The recent rise in Treasury yields likely has technical drivers in the mortgage-backed bond market.

Flood maps, which designate areas where mortgage borrowers must buy policies are often out of date and don’t focus on the danger of rain-caused issues.

The move comes amid intense regulatory scrutiny of the commercial real estate market that has sparked a tightening of rules for lenders and brokers.

The agency is disclosing the percentage of unpaid principal balance held by borrowers in rural areas as classified by the U.S. Department of Agriculture.

Just because millions of empty properties are located in U.S. cities, it doesn’t counter the fact that an inventory shortage exists, or fix it, LendingTree said.

This week’s economic calendar is choked with Fed speeches and most of them are happening today.  Collectively, those will be more relevant than the release of the Minutes from the most recent Fed meeting (because that was 3 weeks ago, but anything before the last jobs report might as well be an eternity). Even then, the Fed’s thoughts would have to be fairly bold and unified in order to have a big impact on a market that set its levels based on the jobs report.  Other than that, we’re left with a modest upward drift in yields with most of the weakness isolated in Treasuries ahead of today’s 10yr auction. Despite the drift, the “leveling off” pattern remains intact after Friday/Monday losses.

Should it concern us that, a few days ago, it was pointed out that from now until Nov. 26, there’s at least one football game on TV to watch every day for the next 55 days? Football has become the center of attention while the focus should be on the recovery efforts happening in many parts of the Southeast, impacting lives and housing stock. Florida is girding its collective loins for Milton, once again bringing up housing and insurance issues. More specifically, the boom & bust cyclical nature of housing there that has existed for decades. Florida has insurance availability problems as well as (now) housing over-supply that get progressively worse with each storm. Institutional (hedge fund) real estate portfolios are now net sellers in Florida over the past 90 days. Many owners must find all-cash buyers because mortgage lenders won’t take the risk associated with these units, but prices have suffered due to owner’s assessments, especially with older units. (Today’s podcast is found here and this week’s is sponsored by LoanCare. The mortgage subservicer is known for delivering superior customer experience through personalization and convenience. LoanCare is part of Fidelity National Financial, a Fortune 500 company and leading provider of services to real estate and mortgage industries. Hear an interview with LoanCare’s Tim O’Bryant on technological capabilities to help with recapture efforts.) Lender and Broker Software, Services, and Loan Programs

Today brought the release of the minutes from the most recent Fed meeting in addition to numerous Fed speeches and the scheduled auction of 10yr Treasuries.  Each of these events has at least some track record of causing volatility for interest rates, but none of them had an impact today. As for the Fed Minutes, it’s no surprise to see a lack of response.  The minutes are simply a more detailed account of the meeting that took place 3 weeks ago.  A lot has happened since then–especially last Friday’s jobs report. Speeches by various Fed officials also held few surprises for financial markets.  When the shoe had been on the other foot, Fed members commonly reminded the market not to place too much focus on a single month of economic data or a single report.  Granted, the single jobs report also provided upward revisions to the previous reports, but even that’s not enough to suggest a change in tack from the Fed–especially when Powell was already clear that the initial 0.50% rate cut is no guarantee that subsequent cuts would be the same size. Despite the absence of inspiration, the bond market drifted into slightly weaker territory.  That normally connotes higher mortgage rates, but due to the timing of intraday volatility, many lenders are right in line with yesterday’s levels.  Lenders who offered mid-day improvements yesterday are a bit higher today.  Those who held the same rates all day yesterday are actually a hair lower on average.

Don’t Expect Salvation From CPI

Bonds lost a bit of ground on Wednesday with Treasuries having a far rougher go of it than MBS, but not by much, ultimately.  If one had to guess at reasons for the MBS Outperformance on a Treasury auction week, blaming the Treasury auction cycle is the easiest solution.  In so doing, we’re also planning on the next rally being better for Treasuries than it would be for MBS.  The present weakness doesn’t have any good, immediate justifications.  This is how the choppy, sideways drift is playing out after the initial rate spike that followed Friday’s jobs report.  The worst may be over, but that doesn’t mean bond weakness is over.  As for salvation, don’t expect miracles from Thursday’s CPI.  It likely has the potential to calm some nerves if it comes in much lower than expected, but even more potential to reinvigorate the sell-off if it comes in much higher.

Market Movement Recap

09:32 AM modestly weaker overnight, moving with Europe. Choppy and sideways since then.  MNBS down 2 ticks (0.06).  10yr up 2.9bps at 4.042

11:56 AM 10yr at highs of the day, up 3.8bps at 4.051.  MBS down an eighth.

01:06 PM No love from auction.  10yr up 5.5bps at 4.068 and MBS down an eighth.

02:09 PM No reaction to Fed minutes.  10yr up 5.6bps at 4.069 and MBS down 5 ticks (.16).

03:44 PM Weakest levels of the day for MBS with 5.0 coupons down 6 ticks (.19).  10yr yields up 5.3bps at 4.066.