Conventional lending drove volumes higher, particularly in the purchase market, the Mortgage Bankers Association said.

The push comes amid what one expert highlighted as lax funding efforts for two Department of Housing and Urban Development grant programs.

Too Soon to Say Higher Yields Are Bringing Buyers?

Bonds enjoyed their best day in more than a month and a half on Wednesday, which can’t help but beg the question: why?  Days like today require a process of elimination and some guesswork.  We don’t have a big, obvious market mover in play in terms of economic data or headlines.  Moving down the list of usual suspects, any time bonds have been as consistently weak as they have been recently, we can talk about “dip buying” (as in traders buying the dip in prices) as well as short covering (traders buying bonds to cover previous bets on higher rates).  Additionally, we can consider the stock market in the midst of it’s biggest correction since last October and the possibility that some of that stock selling may be turning into bond buying.  Either way, the important consideration is that this is only one day and not necessarily a sign of anything new as much as it’s a byproduct of things that have already happened.

Econ Data / Events

Housing Starts

1.321m vs 1.48m f’cast, 1.549m prev

Building Permits

1.458m vs 1.514m f’cast, 1.523m prev

Market Movement Recap

09:41 AM 10s are down 4.5bps at 4.623. MBS are up roughly a quarter point.

12:34 PM brief weakness into the 10am hour, but stronger since then.  MBS up almost 3/8ths and 10yr down 6.5bps at 4.604

01:49 PM well received 20yr bond auction followed by the best levels of the day.  MBS up 13 ticks (.41) and 10yr down 8.4bps at 4.585.

“We base our business model on lots of things, but not on our ability to predict rates.” Remember when there used to be “a flight to quality” when there was world unrest, and investors put their money into dollar-denominated assets? Long gone. Even if one knew exactly what was going to happen in the United States, how can anyone, including the Federal Reserve, predict much of anything given the global uncertainty, violent or otherwise, and an event’s impact on mortgage rates? (Speaking of the Fed & rates, the current STRATMOR blog is titled, “Relying on the Fed: How Did This Happen?” (Found here, this week’s podcasts are sponsored by Optimal Blue. OB’s smart solutions automate critical functions like pricing, hedging, trading, and social media. More originators and investors rely upon Optimal Blue’s integrated solutions, data, and connections to support their unique business strategies, no matter how complex. Hear an excerpt of an interview with former CFPB Director Kathy Kraninger from last week’s Mortgage Matters show that airs every Wednesday at 11am PT/2pm ET. Register for today’s show with guest Tom Davis of Deephaven.) Lender and Broker Products, Software, and Services Real estate valuations continue to be complex and ever-evolving, especially today with proposed regulatory changes and unpredictable market dynamics. Creating an effective valuation strategy is vital for lenders to manage risk and streamline operations. Watch this complimentary webinar hosted by ICE to learn all about the world of automated valuation models (AVMs)*. You’ll find out when to use an AVM to address challenges in the current valuation landscape; why AVMs are considered a credible, objective option for collateral risk management; and how they can help your business – from lead generation and portfolio management to cost reduction and more. *Check with your compliance or legal department for information on complying with applicable law.

Mortgage rates moved lower today after hitting the highest levels since mid November yesterday.  Some lenders were down as much as an eighth of a percent, which is on the bigger side for a day-over-day change for conventional 30yr fixed rates.  As nice as it is to see a big improvement, it’s important to understand the nature of the move.  Even when rates are spiking consistently higher, the carnage is invariably punctuated by brief moments of reprieve.  In fact, it’s very rare for a rate spike to play out with each successive day being higher than the last.   In other words, as of today, it’s not safe to view this improvement as anything other than a token bounce that exists as a normal byproduct of the pain that came before it.  All that having been said, there is also a chance that rates have moved up enough to get into their desired defensive position for the next round of big ticket data in early May.  We’ll be able to better assess that possibility over the next two days.

The bond market is getting off to a stronger start today despite an absence of any new motivations in the news or economic calendar.  In fact, the calendar is essentially empty when it comes to market movers.  While we could make a case for some friendly spillover from European bonds, and while the timing and correlation line up fairly well, it was arguably US bond markets leading the charge heading into 9am. Or more accurately, it was Treasuries with the bigger, sharper move. 

Either way, we don’t need to try so hard to reconcile some strength after multiple successive days of significant weakness.  Token bounces are going to happen amid such trends.  It’s just a token bounce unless its friends show up in the coming days.

The only notable items on the calendar this afternoon are the 20yr bond auction and the Fed’s Beige Book.  Both are arguably not really that notable, but they’re all we have.  

Mortgage interest rates rose for the second straight week, and so did the volume of mortgage applications. The Mortgage Bankers Association (MBA) said its Market Composite Index, a measure of that volume, increased 3.3 percent on an adjusted basis from one week earlier and 4.0 percent before adjustment.   The Refinance Index increased 0.5 percent from the previous week and was 11 percent higher than the same week one year ago. The refinance share of activity decreased to 32.1 percent from 33.3 percent the previous week. [refiappschart] The seasonally adjusted Purchase Index was up 5 percent from one week earlier, and the unadjusted version was 6.0 percent higher. Purchasing activity was down 10 percent compared to the same week in 2023. [purchaseappschart]  “Rates increased for the second consecutive week, driven by incoming data indicating that the economy remains strong and inflation is proving tougher to bring down. Mortgage rates increased across the board, with the 30-year fixed rate at 7.13 percent – reaching its highest level since December 2023,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “ Despite these higher rates, application activity picked up, possibly as some borrowers decided to act in case rates continue to rise. Purchase applications drove most of the increase but remain at low levels of around 10 percent behind last year’s pace. Refinance applications increased very slightly, driven by a 3 percent gain in conventional applications.”

The Federal Home Loan Bank System stepped up advances by 37% or more to Silicon Valley, Signature and First Republic banks ahead of their failures, the GAO says in a post-mortem on last year’s banking crisis. The findings add to the debate about whether the system should be a lender of last resort.

In a motion to dismiss UWM’s suit, Ramon Walker argues the trademark infringement claim made by UWM is a “pretext to muzzle [his] criticism.”

Greater availability of data can make it more attractive to buy MBS with loans to underserved borrowers, translating into lower interest rates for those mortgages.