Financial institutions have trouble pinning down a common definition of AI and figuring out which of their processes incorporate the technology. That can lead to trouble with regulators.

The leading mortgage player posted another nine-figure profit, although its gain-on-sale margins slipped.

The cybersecurity company promised more rigorous tests for software updates after a widespread IT outage last month.

The Mortgage Assets Management deal and new name aim to position Onity as an diversified entity that can handle rate shifts like the currently anticipated one.

A pick-up in home prices during spring buying season pushed the share of equity-rich households higher across the country, according to Attom.

Rates Taking an Assumptive Lead-Off Ahead of Jobs Report?

Suddenly, something has changed in the bond market.  After a very sideways week last week and a reasonably sideways start to the present week, Wednesday and Thursday have seen the best 2 day gain (considering size of the move and its location in a trend) since December 2023.  Wed was more notable than Thu in that regard because the rally was bigger and it was based primarily on an equivocal Powell press conference.  Thursday’s data argued in favor of a rally, but investors seemed uncommonly willing to chase yields lower relative to the data.  To some extent, the market could be positioning for Friday’s jobs report to strike a similar cord.  

Econ Data / Events

Jobless Claims

249k vs 236k f’cast, 235k prev

ISM Manufacturing

46.8 vs 48.8 f’cast, 48.5 prev

ISM Prices

52.9 vs 51.8 f’cast, 52.1 prev

Market Movement Recap

08:41 AM stronger after claims.  MBS are back to unchanged 10yr yields are also unchanged at 4.031 after starting as high as 4.066.

11:50 AM Additional gains after ISM data, but off the best levels now.  MBS up 5 ticks (.16) and 10yr down 4.3bps at 3.988.

02:37 PM Near afternoon lows but MBS are still up an eighth.  10yr down 4.6bps at 3.985.

04:35 PM Sideways all afternoon, despite a bit of volatility.  MBS up 5 ticks (.16) and 10yr down 5.2bps at 3.979

Thank you to Ira S. who points out that today marks the Spirit Halloween Stores opening. The origins of Halloween go back thousands of years via dozens of cultures, unlike personal computers (PCs) that only date from the 1970s, but also springing forth from dozens of companies. (I consider myself fortunate to be on very good terms with Apple’s Steve Wozniak, and in fact many of my jokes come from him.) Old timers remember the snippet, “PCs didn’t replace people, but people who used PCs did replace ones that didn’t.” Perhaps something similar could be said for AI: AI won’t replace human workers but people that use it will replace people that don’t. “It’s not if, but when.” How ‘bout the latest hack: AT&T and all its customer’s personal information! Are you controlling your company’s technology, or is it controlling you? There’s so much going on and you, the user, don’t know it. Computer viruses can spread by using ChatGPT to write sneaky emails. Social media influencer Lisa Li crafted her version of an AI boyfriend using ChatGPT. (No comments, please, about how she probably can’t get a real boyfriend.) OpenAI’s ChatGPT Mac app was storing conversations in plain text. Meanwhile, some auto dealerships are returning to keeping paper and pen records of their transactions due to cyber-attacks. (Today’s podcast is found here and this week’s is sponsored by Optimal Blue. Optimal Blue bridges the primary and secondary mortgage markets to deliver the industry’s only end-to-end capital markets platform, helping lenders maximize profitability and operate efficiently so they can help American borrowers achieve the dream of homeownership. Hear an interview with new Optimal Blue CEO Joe Tyrrell on leadership, the race for AI in mortgage, and Optimal Blue’s strategy as a capital markets leader.)

It’s official!  At this point, you’d need to go all the way back to the end of December 2023 to see a lower average rate for a top tier, conventional 30yr fixed mortgage.  Today’s rates are already fairly close to those late-December levels.  Any further improvement would result in the lowest levels since May 2023.   We were already at 6 month lows yesterday, so today didn’t really change the game.  That said, this most recent rally represents an extension of a broader rally that began in May, and that one is definitely a game changer.  These past 3 months mark an abrupt shift in what had been a decisive uptrend in rates in Jan-April. Rates don’t necessarily “decide” to spend an entire month doing one specific thing, nor are they guaranteed to remain in the sorts of linear trends seen so far this year.  There are good cases to be made for those trends aligning with the most relevant economic data and events. With that in mind, the events of the past 2 days clearly have the market thinking about additional rate-friendly economic data.  Today’s installment consisted of the highest Jobless Claims reading in a year and big miss in an important manufacturing sector index.  This data caused rapid improvement in the bond market which, in turn, allowed mortgage lenders to set lower rates today. Tomorrow’s economic data is an order of magnitude more important than today’s.  The Employment Situation (aka “the jobs report”) will be released at 8:30am ET.  It is one of the two most important reports on any given month and easily has the power to cause a big move for rates in either direction.

Bonds were exceptionally sideways in the overnight session with 10yr yields holding between 4.05 and 4.06 for almost the entirety. It wasn’t until the 8:30am jobless claims data came out that signs of life emerged.  Claims were the highest in a year, resulting in a logical but modest rally.  At 10am, ISM Manufacturing took the rally to the next level by coming in much weaker than expected.  With that, 10yr yields are entering the mid-morning hours well under 4.0% for the first time since February 2nd.

The index of contract signings from the National Association of Realtors increased 4.8% to 74.3 in June, reflecting increases in all four major regions, the group said Wednesday.