Last week was a hopeful one for interest rates.  The average top tier 30yr fixed mortgage rate fell more than 0.20% from the previous week’s highs as underlying markets took some solace in the absence of major trade war escalations. Despite the solid improvement, the outright level of rates remained elevated compared to most of the past 2 months. In addition, the risk of volatility could not (and cannot) be ruled out when the market is more willing to react to fiscal policy headlines than economic data. The latest headlines involve heavy criticism of Fed Chair Powell on the part of The President. Without any comment on whether that criticism is justified, we can still observe that markets find it unsettling. Traders are expressing that sentiment by pushing stocks lower and rates higher. Mortgage rates jumped fairly sharply today, with the average lender moving up from 6.87% to just under 7.00% for top tier 30yr fixed scenarios.

Unfortunate Market Movement For Unfortunate Reasons

Global financial markets partook in a slow motion train wreck on Monday as investors shunned USD-denominated assets and the dollar itself in response to Trump’s vocal criticism of Fed Chair Powell.  The criticism itself wouldn’t be too tough to deal with, but the prospect of “firing” the Fed Chair seems to figure much more prominently into this edition of Trump vs Powell than it did during Trump’s previous term.  In not so many words, this would be “bad” for both stocks and bonds.  Today wasn’t catastrophic by any means, but the correlated weakness between stocks, bonds and the USD is an important proof of concept. 

Econ Data / Events

Leading Indicators

-0.7 vs -0.5 f’cast, -0.3 prev

Market Movement Recap

10:13 AM Weaker overnight, but pushing back since 8am ET.  MBS down just over an eighth and 10yr up 3bps at 4.355

12:35 PM Nice gains into 1030am, but weaker since then.  MBS now down 9 ticks (.28) and 10yr up 5.1bps at 4.377

01:44 PM weakest levels of the day for MBS with 5.5 coupons down 13 ticks (.41) and 10yr up 7.4bps at 4.40

04:00 PM More new lows.  MBS down half a point and 10yr up 9.2bps at 4.419

Even with various tariff pauses and exemptions, suppliers are raising prices due to ongoing policy uncertainty, and consumers also are altering their behavior.

The state and local tax deduction is a write-off that most Americans will never claim, even in the districts of the lawmakers fighting hardest to increase the tax break, data analyzed by Bloomberg News shows.

The statement posted on social media platform X could reflect policy, politics or both. Clarification was not immediately available at deadline.

Even after posting production losses in two of four quarters last year, independent mortgage bankers made $443 on every loan originated during 2024.

Nearly a quarter of home sellers in March slashed their listing prices, the highest rate of price cutting since 2018 according to a Zillow report.

One would think that the pace of new residential construction largely mirrors the pace of filings for building permits. And while that is generally true in the bigger picture, there can be noticeable discrepancies month to month. This week’s data from the Census Bureau is the latest example. Building permits were slightly higher at 1.482 million units (annual pace) versus 1.459 million previously. Contrast that to housing starts (the term for the ground-breaking phase of home construction) which fell to 1.342 million from 1.494 million previously. This excess volatility in housing starts can be seen in the following chart with the blue line whipping higher and lower many times over the past few years while the orange line remains relatively more steady. There was a heavy regional skew to the housing starts numbers with two regions moving higher and two moving lower as follows:
Northeast

+2k starts (+1.4%)

Midwest

+96k starts (+76.2%)

South

-139k starts (-17.1%)

West

-129k starts (-30.9%)

Note: the count of housing starts account for a different percent change depending on the overall activity level in the region.  For example, starts declined more in the South than in the West, but the percent change was much lower because the South had a total level of 524k versus only 289k in the West. If you’re thinking that all of the above sounds pretty boring and/or you’re wondering why it even matters, you’re right.  Home construction data is pretty boring–just a slow, steady grind until something big starts happening. 

The National Association of Homebuilders (NAHB) and Wells Fargo publish the Housing Market Index (HMI) each month, otherwise known simply as “builder confidence.”  This month’s index came out at the 2nd lowest level since late 2023. While that might sound dramatic, it’s very much in line with the prevailing trend for this report. And while the chart above may make it seem like confidence is in the gutter, it’s really only about halfway in the gutter in the bigger picture. There were some interesting details inside the report. Specifically, 60% of builders said that tariffs were already impacting prices or leading to announcement of impending price increases from some suppliers.  The NAHB notes that tariff-related price increases currently average 6.3%, or $10,900 on an average home.

Don’t Sweat The Modest Weakness

Bonds began the day roughly unchanged and very flat for most of the morning. MBS began falling as we moved into the PM hours, ultimately resulting in a handful of negative reprices, about a quarter point of weakness, and a 4+bp jump in Treasury yields. If the frame of reference is limited to the domestic session, this is a moderate sell-off at best, but in the bigger picture, it was not even worth mentioning, let alone considering as a cause of concern. Bonds are heading into the 3 day weekend at much less alarming levels than last week, and with the the same requirement to wait for clarity on fiscal policies before the next major movement is revealed.

Econ Data / Events

Jobless Claims

215k vs 225k f’cast, 224k prev

Philly Fed

-26.4 vs 2.0 f’cast, 12.5 prev

Philly Fed Prices

51.0 vs 48.3 prev

Philly Fed New Orders

-34.2 vs 8.7 prev

Market Movement Recap

08:43 AM Initially weaker overnight, then reversing into U.S. hours. Slightly stronger after data.  MBS down 1 tick (.03) and 10yr up 0.7bps at 4.285

12:37 PM Weakest levels now.  MBS down an eighth and 10yr up 5.1bps at 4.329