Today’s mortgage rates were fairly close to yesterday’s at the average lender for the 3rd business day in a row.  Friday was the last day with any substantial movement when rates spiked following the upbeat jobs report.  Since then, the average lender has only moved by 0.01% on each of the past 2 days. The absence of movement made better sense yesterday.  Rates are based on trading levels in the bond market and bonds ended the day very close to Friday’s levels.  It’s a bit harder to reconcile today given that bonds did quite well–especially after the auction of 10yr Treasury notes at 1pm Eastern time. Mortgage rates are often discussed against a benchmark of a 10yr Treasury yield.  The two tend to move in the same direction by generally similar amounts.  10yr Treasury yields are 0.07% lower today and the average mortgage rate is only 0.01% lower at the time of this writing.  What’s up with that? First off, Treasuries tend to see bigger upsides and downsides when bonds are reacting to a Treasury auction.  Timing is also a factor with the auction happening late in the day.  Several mortgage lenders have already revised their initial rates lower in response, but the improvements won’t be captured in our rate index until tomorrow. That brings us to another issue: tomorrow is a potentially crazy day for better or worse.  Well before mortgage lenders publish rates for the day, the Consumer Price Index (CPI) will be released for the month of May.  It has more power than any other economic report to push rates higher or lower, depending on the outcome.  Anticipation of that volatility could also have mortgage lenders feeling less like making any last minute changes.

Treasury Auction Helps Bonds Hold The Range

If yesterday was a placeholder ahead of bigger ticket events, and if those bigger ticket events arrive on Wednesday, then Tuesday couldn’t possibly be anything other than a placeholder as well.  That said, it was a more interesting placeholder with some friendly volatility delivered by a strong showing at the 10yr Treasury auction.  In some regard, the bond market’s willingness to bid aggressively at this auction (with CPI and the Fed coming up the following morning) might confirm something about the underlying bullish predisposition discussed last week.  But then, as now, the catch is that a bullish predisposition still requires confirmation in the data.  On that note, all eyes on Wednesday’s CPI.

Econ Data / Events

10yr Treasury auction

4.438 vs 4.458 expectations

bid to cover

2.67 vs 2.49 avg

Market Movement Recap

10:08 AM Stronger overnight with a modest pull-back around 9am.  10yr down 3.2bps at 4.451.  MBS up an eighth of a point.

12:31 PM Weakest levels of the day ahead of Treasury auction.  MBS unchanged and 10yr down 2bps at 4.463.

01:03 PM Solid gains after 10yr Treasury auction.  10yr down 5.2bps at 4.434.  MBS up an eighth in 6.0 coupons. 

03:13 PM Best levels of the day for Treasuries with 10yr down 7bps at 4.414.  MBS are nearly back to opening highs, up 6 ticks (.19).

I head to Sarasota, Florida this morning, not to look for Florida Man, but for the MBA Florida Conference. A big topic will be homeowner’s insurance. What do Allstate, Liberty Mutual, State Farm, USAA, and Travelers have in common? They were singled out for being good insurance companies in the state. (Any insurance company is a good company in some places these days.) This is good for LOs to know, especially given Florida’s growth. The U.S. Census Bureau tell us that Florida was home to four of the nation’s top five fastest-growing metropolitan statistical areas and three of the top 10 that gained the largest number of people from 2022 to 2023, reflecting continued population growth across the South. Three metro areas collectively added nearly 150,000 residents from 2022 to 2023: Orlando-Kissimmee-Sanford (54,916); Tampa-St. Petersburg-Clearwater (51,622); and Miami-Fort Lauderdale-West Palm Beach (43,387). (Today’s podcast is found here, and this week’s are sponsored by Richey May, a recognized leader in providing specialized advisory, audit, tax, cybersecurity, technology, and other services to the mortgage industry. Hear an interview with NEXA Mortgage’s Mike Kortas on the success of the broker model and recent news out of the company.) Software, Products, and Services for Lenders and Brokers “PlainsCapital Bank National Warehouse Lending, a subsidiary of Hilltop Holdings (NYSE: HTH), is committed to providing mortgage lenders with a sustainable funding source in an uncertain market. With over 30 years’ experience and a well-capitalized, diversified financial holding company. PlainsCapital Bank National Warehouse Lending provides confidence to meet our mortgage lending partners funding needs. With exceptional operational performance, and a focus on relationship-driven business geared towards long-term success, we do not dwell on unnecessary fees. With PlainsCapital Bank National Warehouse Lending there are NO non-usage fees, NO application or renewal fees, NO third party due diligence fees and NO interest charged on the day your loan funds. If you are interested in learning more about PlainsCapital Bank National Warehouse Lending please contact Deric Barnett (469-955-6786).”

Not every day is destined to be significant (or even interesting) for the bond market.  Depending on the outcome of today’s only relevant calendar event–this afternoon’s 10yr Treasury auction–today may be just such a ‘placeholder.’  But what it lacks in terms of excitement, it makes up for in terms of being inoffensive from a directional standpoint.  Specifically, yields moved nicely lower overnight and remain in stronger territory after a modest morning pull-back. Even if the auction changes things in a seemingly big way, it would still pale in comparison to the potential volatility associated with tomorrow’s CPI/Fed combo.
As for today’s market movement so far, the typical correlations aren’t doing a good job of explaining things.  Even the following may be a bit presumptuous, but it’s the most obvious correlation when it comes to events that are actually new and newsworthy.  You’d be forgiven for not being up to speed on this news, however, since it involves political drama in France.  In not so many words, the associated uncertainty pushed French yields sharply higher overnight and caused a flight to safety that benefited German and US debt.  Now this morning, some of the pull-back in Treasuries also correlates with a correction in the French sell-off.

The headcount reduction comes one month after more layoffs in Colorado and Florida.

Rate locks have increased every month this year, but May’s pace came in more subdued than early-year numbers, according to Mortgage Capital Trading.

The position had been occupied by Scott Smith on an interim basis following Black Knight’s sale of the company to Constellation Software.

Nearly one-in-five homeowners have to borrow to pay unexpected expenses related to their property, although 24% claim to have a rainy day fund, according to Bankrate.

With millions of Black and Hispanic consumers likely to become new homeowners over the coming decades, the lending community stands to benefit if they are willing to combine expanded underwriting with direct outreach.

There’s been a noticeable uptick in mortgage rate volatility over the past two weeks with a quick spike at the end of May, a nice drop in early June and then another spike last Friday following the jobs report.  Of course everything’s relative, so in objective terms, it was roughly a 0.30% round trip for conventional 30yr firxed rates.   Today’s move is microscopic by comparison with the average lender only 0.02% higher from Friday.  That’s not too surprising considering the lack of actionable data on the calendar for bond traders (bond market movement drives day to day mortgage rate movement). All that is about to change.  The event calendar ramps up quickly from here and Wednesday will be the most important day of the month due to the release of pivotal inflation data and an updated rate announcement and outlook from the Fed.  While there’s no chance of a rate cut or hike at this meeting, we should get more clarity on the Fed’s interpretation of the very latest trends in inflation.