It is a starkly data-free week for all intents and purposes, but some economic reports are with us as always on a weekly basis.  Thursday’s initial jobless claims data is the most notable weekly report even though it rarely causes a reaction in the bond market.  Today is a clear exception owing to the much larger than normal deviation from the forecast consensus (231k vs 210k prev). 

Even though several analysts and trade desks have attempted to explain away the increase, bonds are unfazed.  After starting the day slightly weaker, we’re now slightly stronger (no impact on the bigger picture and nothing significant… just a nicer start).

The chart above may make today look like a bigger deal, so let’s take a moment to zoom out and include the past month of market movement to see how today stacks up:

A group of plaintiffs in another action against the National Association of Realtors and three franchisors claimed harm if the May 9 final settlement hearing took place.

The rates of single parent homeownership by gender differ by 14 percentage points, even though more single women own homes than men.

Out of the 221 metro areas tracked, 205 had existing home price increases and just 15 reported year-over-year declines, the National Association of Realtors said.

Purchases and refinances both contributed to weekly growth, with notable increases in certain government-lending segments, the Mortgage Bankers Association said.

McCargo will succeed Teresa Bryce Bazemore at what the former sees as a “transitional, pivotal moment” for the Federal Home Loan bank.

Yesterday, we took a look at the recent winning streak for mortgage rates.  Specifically, they had moved lower for 5 straight days–a feat only achieved two other times this year.  While there have been streaks more than twice as long, the odds of a pull-back start increasing pretty quickly at the 5 day mark and today provided fresh evidence. Thankfully, the pull-back was very small with the average lender only moving up 0.01%.  That means many borrowers won’t see any difference in today’s rate quotes versus yesterday’s.  There were no major sources of volatility today for the bonds that underlie mortgage rate movement.  That’s a theme for the entire week when it comes to scheduled data.  Unexpected market movers are always a risk, but the biggest risks are tied to a few scheduled economic reports.  Next week’s Consumer Price Index remains the best example.

Token Pull Back Keeps Things Boring

Coming into this week, we expected things to be boring and sideways after last week’s more directional movement.  So far, everything is going according to that plan.  In order to maintain a boring, sideways stance today, the bond market needed to do a bit of selling lest the trend remain decidedly directional (it would have been the 6th straight day with lower yields).  Intraday volatility was modest at best.  Yields were higher at the outset and didn’t change much over the course of the day.  The 10yr auction had essentially no impact, but that’s understandable as it came in fairly close to expectations. 

Market Movement Recap

10:54 AM Modestly weaker overnight and into the 9am hour.  Bouncing a bit since 9:40am.  MBS still down an eighth and 10yr up 2.7bps at 4.485

01:03 PM Minimal reaction to 10yr auction.   MBS still down an eighth.  10yr up 3.1bps at 4.489

04:15 PM Very sideways into the close.  MBS down 5 ticks (.16) and 10yr yields up 4bps at 4.497

After a very long travel day filled with odd, time-sucking delays, when I arrived in Birmingham I was happy to hear Alabama on the Uber car’s radio singing, “My Home’s in Alabama.” “That my home’s in Alabama, no matter where I lay my head. My home’s in Alabama, Southern born and Southern bred.” Home prices in Alabama have tended to mimic many parts of the United States: In March 2024, home prices in Alabama were up 1.1 percent compared to last year, selling for a median price of $273,500 with the number of homes sold being down 8.9 percent year over year, per Redfin. (This morning NAR reported that more than 90 percent of metro markets posted home price gains in the first quarter of 2024: latest quarterly report.) There’s ample inventory, with over 22,000 homes for sale in Alabama, up nearly 11 percent year over year. A chunk of those are in Huntsville, 100 miles to the north of Birmingham, Alabama’s most populous city and the home of NASA’s Marshall Space Flight Center. (Found here, this week’s podcasts are sponsored by Matic, the digital insurance marketplace built for the mortgage industry. Matic integrates home insurance shopping into the lending and servicing experience, allowing customers to shop carriers and find a policy in minutes. Create a new revenue stream that boosts customer happiness today! Hear an interview with Matic’s Ben Madick on the insurance landscape and trends impacting both potential homebuyers and existing homeowners.) Lender and Broker Software and Services

One of the notions surrounding the Treasury auction cycle is that the bond trading community tends to build in a “concession” ahead of any given auction.  That’s a fancy word to say “rates go higher.”  Clearly, if that was always the case, speculators could reliably bet on it and, over time, it would get back to being less of a certainty.  Nonetheless, it is still a fairly reliable occurrence to see some selling ahead of an auction, albeit without predictable timing or magnitude.  The practical reason for this is that traders will buy $42bln in 10yr notes this afternoon, and that’s $42bln less in buying demand available before the auction.  Lower demand = lower prices = higher yields.  
All of the above assumes we’re talking about a level of movement that actually matters, and today’s movement really doesn’t.  So far, today’s narrow range is fully contained by yesterday’s range (i.e. today is an “inside day”). Moreover, it’s a very small uptick in yields that follows 5 straight days of gains.  This is one of those rare times that the future actually becomes less and less random. The more consecutive trading sessions bonds string together in the same direction, the more likely it becomes to see at least some sort of a push back in the other direction–even if only small and temporary.