A Billings, Montana-based First Interstate Bank agreed to a five-figure penalty to resolve charges it engaged in National Flood Insurance Act violations.

Federal Reserve Bank of New York President John Williams said he’s seen enough data to be comfortable with a rate cut at the Federal Open Market Committee meeting later this month.

Growth in housing costs should slow down over the next two years, but projections for 2024 were revised upward in a Fannie Mae survey of experts.

Mortgage rates have a long and storied history of making big moves on the day that the big monthly jobs report comes out.  In that regard, today was fairly normal.  Indeed, the jobs report came out and mortgage rates made their biggest move of the week, dropping to the lowest levels since April 2023. The biggest catch in today’s case was the fact that much of the market movement came in response to comments from several Fed officials who weighed in on the prospects for the rate cut in a week and a half.  Granted, the jobs report influenced those comments, but they were ultimately reduced to votes for a 0.25% vs a 0.50% rate cut (the Fed is cutting either way).  To be fair, the Fed comments had a bigger impact on parts of the market that don’t directly correlate with mortgage rates.  That was a victory for us today.  Rates would have been higher otherwise.   If this seems slightly confusing, it’s important to remember that the Fed Funds Rate does not move hand in hand with mortgage rates.  Mortgage rates move well in advance of the Fed because mortgage rates are tied to the real-time bond market whereas the Fed only updates rates 8 times per year.  Moreover, the Fed Funds Rate applies to the shortest time frames (

Wild Ride on Jobs Day as Fed Speakers Steal The Show

We came into jobs report day expecting some clarity on the size of the Fed’s impending rate cut and in hindsight, it’s abundantly clear that traders felt the same way.  The only catch is that the lion’s share of the clarity was reserved for a few short comments from Fed’s Chris Waller. The market initially mistook those comments to suggest a 50bp cut, but swiftly reconsidered.  In terms of Fed Funds Futures, the volume and volatility surrounding Waller’s comments were FAR bigger than the action surrounding the jobs report earlier in the morning. Ultimately, it was a good enough day for rates with bonds holding modest gains.

Econ Data / Events

Nonfarm Payrolls

142k vs 160k f’cast
last month revised to 89k from 114k

Unemployment Rate

4.2 vs 4.2 f’cast, 4.3 prev

Earnings

0.4 vs 0.3 f’cast
last month revised to -0.1 from 0.2

Market Movement Recap

08:52 AM 2-way trading after jobs report with nice initial gains and now some backtracking.  MBS up 2 ticks (.06) and 10yr down 2.1bps at 3.708

09:18 AM Back to unchanged in Treasuries.  MBS now up only 3 ticks (.09).  No reason for the reversal in terms of new info/data.

10:32 AM Back to stronger levels now with 10yr down 3bps at 3.698.  MBS up 5 ticks (.16).

12:34 PM Well off the best levels now.  MBS down about a quarter from highs, but still up 3 ticks (.09).  10yr down 1bp at 3.72, but up sharply from 3.646 lows. 

04:31 PM Lots of back and forth, but not a lot of lasting change.  10yr down less than 1bp at 3.722.  MBS up an eighth of a point

At first glance, this morning’s jobs report suggested a modest but clearly-defined increase in the likelihood of a 50bp rate cut from the Fed in 2 weeks.  Headline nonfarm payrolls came in at 142k vs 160k forecast.  In addition, the past 2 months were revised down by a total of 144k.  As of today, that leaves the 3 month average NFP at 116k, a far cry from last year’s 232k or 2024’s YTD 207k.  In other words, it’s more than just one month of jobs data that suggests a shift in the labor market.  Bonds pounced on that fact at first, but trading has been extremely “2-way” since then.
At one point, the AM gains were completely reversed and yields moved well into negative territory.  But we’re back near the best levels of the day during the 10am hour–perhaps with some credit due to heavy losses in stocks. 

There’s more going on here than a simple resolution of heavy positioning among bond traders.  There are also real-time changes in the market’s expectations for the size of the Fed rate cut.  Just look at the volatile swings in September’s expected Fed Funds Rate!

But now let’s look at the same chart with enough of a y axis to show where the line would need to be in order to convey 100% likelihoods for a 25bp and 50bp rate cut.

Bottom line: there’s some volatility in rate cut expectations, but we’re far from any meaningful resolution. 

“The credit card company called me to report suspicious activity… I asked what kind of suspicious activity, and they said someone made a payment.” “Well, I’ve got a job and try to put my money away. But I’ve got debts that no honest man can pay. So, I drew what I had from the Central Trust…” (Ask me some time in person about meeting and chatting with many of the folks in that band.) Debt is not fun, and in fact, is quite the opposite. Take a look at this graph from the St. Louis Fed of credit card and revolving debt, moving toward $1.1 trillion. Yesterday I spent some time at a school telling Ms. Chrisman’s 7th graders about how a bank works, what a mortgage is, and how home and credit card debt work. It was educational for them, and very educational for me in terms of what they seemed most interested in and what the 12-year-olds asked the most questions about. Financial education, and thus literacy, can’t start too young. (Today’s podcast is found here and this week’s is sponsored by Stavvy. Moving real estate beyond paper documents. Stavvy is the digital platform that helps real estate professionals grow their business and ditch the paper process. Book a demo today! Hear an interview with Stavvy’s Angel Hernandez on his vision for digital transformation, and how electronic documents are helping make that a reality.) Lender and Broker Software, Services, and Loan Programs MIG achieved 100% VOIE conversion improvement with Truv. MIG boosts VOIE conversion by 100% and cuts costs by 80% with Truv. Mortgage Investors Group was facing rising costs of verification of income and employment and decided to make a change that led to 80% cost savings. Learn more.

The Republican presidential nominee laid out his economic platform during a speech at the Economic Club of New York.

The central bank has been under pressure to modernize its last-resort lending operation since the failure of three large regional banks last year.

The Consumer Financial Protection Bureau said some non-profit hospitals are failing to provide assistance to low-income consumers, while landlords may be illegally charging fees to pay rent through online portals.