A Really Bad Day For The Bond Market

To reiterate the point made in today’s morning commentary, there was a mismatch between the size of the beat in the core inflation data (0.4 vs 0.3) and the size of the move in the bond market.  This wasn’t a glaringly huge problem considering the February’s CPI beat resulted in about 15bps of weakness in the 10yr while today was “only” 18bps, but it just emphasizes the extent to which the market has increased its focus on this particular report.  The afternoon’s 10yr Treasury auction added meaningfully to the weakness, and the Fed Minutes passed without a trace.  Geopolitical headlines (vague warning regarding potential for Iran attacking Israel) helped modestly, and were the only other source of volatility after the auction.

Econ Data / Events

Core mm CPI  

0.4 vs 0.3 f’cast, 0.4 prev

Core yy CPI 

3.8 vs 3.7 f’cast, 3.8 prev

Market Movement Recap

08:29 AM A hair stronger ahead of CPI with MBS up 3 ticks (.09) and 10yr yields down 2bps at 4.344

08:42 AM Sharply weaker after CPI.  MBS down 5/8ths of a point.  10yr up 13bps at 4.498.

10:42 AM Flat at weakest levels over the past 2 hours.  MBS down nearly 3/4ths and 10yr up 12.7bps at 4.492.

12:36 PM drifting to weakest levels with MBS down 26 ticks (.81) overall and 10yr up 15bps at 4.515

01:46 PM Additional weakness after 10yr auction with 10s briefly up to 4.568.  Still up 18.6bps at 4.55%.  MBS down a full point.

04:09 PM coasting out near weakest levels.  5.5 coupons down just over a point.  10yr yield up 18.1bps at 4.546.

When it comes to big ticket economic events, the average anticipatory headline tends to be a bit more dramatic than the actual outcome.  It’s our way of preparing the audience for what’s possible even though reality only occasionally explores the depths of those possibilities.  Then there are days like today where a meager 0.1% beat in core CPI has resulted in a level of selling pressure we might have expected to follow a much more alarming data result. 

10yr yields are already up to 4.50% and the first Fed rate cut is now being priced in for September by Fed Funds Futures.

The interest rate for conforming 30-year fixed-rate mortgages (FRM) again topped 7 percent last week, but mortgage application activity still squeezed out a tiny gain.  The Mortgage Bankers Association (MBA) said its Market Composite Index, a measure of application volume, increased 0.1 percent on a seasonally adjusted basis. On an unadjusted basis, the Index increased 0.2 percent compared with the previous week. But that tiny gain was due solely to a 10.0 percent increase in refinancing (plus 4.0 percent year-over-year) while the purchase mortgage level fell 5.0 percent on a seasonally adjusted basis. Refinancing accounted for 33.3 percent of applications during the week compared to 30.3 percent a week earlier. [refiappschart] The non-seasonally adjusted Purchase Index was 4.0 percent lower last week and down 23 percent from its level the same week one year ago. [purchaseappschart] “Mortgage rates moved higher last week as several Federal Reserve officials reiterated a patient posture on rate cuts. Inflation remains stubbornly above the Fed’s target, and the broader economy continues to show resiliency. Unexpectedly strong employment data released last week further added to the upward pressure on rates,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “The 30-year fixed rate increased to 7.01 percent, the highest in over a month. Purchase applications were down almost five percent to the lowest level since the end of February, but refinance applications were up 10 percent, driven particularly by VA refinance applications.”

The newly launched Rocket Logic platform can pull and analyze documents instantly, helping to shrink closing times by about 25%, the lender claims.

In a message to broker partners, UWM defended its business practices and claimed one of the contributors to the piece worked at a Rocket Mortgage affiliated brokerage for the last five years.

Mortgage lenders offered more cash-out refinance programs at a time when consumers might be coming to terms with the rate environment.

Tracy Stephan’s appointment to the new role is in line with broader federal directives follows other changes in staffing in the Office of Financial Technology.

The servicer charges borrowers $25 to obtain a payoff quote statement.

Nice Tuesday For Bonds, But It’s All About Wednesday

Tuesday turned out to be great for bonds with MBS up nearly a quarter of a point for most of the day and 10yr yields ultimately dropping into the 4.35’s by the final hour of trading.  As nice as it is to see a rally these days, it’s best thought of as an isolated, random victory without any bearing on the bigger picture.  Granted, we may be seeing some evidence of “value buying” with yields getting near 4.5% on Monday, but Wednesday’s CPI would still need to cooperate in order to confirm that hypothesis.  To be clear, there is no way to know whether CPI will do that.  It’s just another coin flip in the game of helping or hurting rates, but on a much bigger scale than the average economic report.

Econ Data / Events

Nonfarm Payrolls

303k vs 200k f’cast, 270k prev

Unemployment Rate

3.8 vs 3.9 f’cast, 3.9 prev

Earnings

0.3 vs 0.3 f’cast, 0.2 prev (revised up 0.1)

Market Movement Recap

08:05 AM Steadily stronger overnight.  10yr down 4.6 bps at 4.381 and MBS up 6 ticks (.19)

10:00 AM Fairly flat in the first two hours.  MBS up 7 ticks (.23) and 10yr down 5bps at 4.377

01:07 PM Modest selling in Treasuries after the auction, but nothing serious.  10yr down 4.8bps at 4.553.  MBS up 6 ticks (.19).

04:07 PM Sideways all afternoon, but modest gains in the past few minutes.  MBS up a quarter point.  10yr down 7.2bps at 4.356

Here in the Hill Country near Austin, Texas, there’s an active market of sellers and buyers of real estate. It is a safe bet that most use agents; around 90 percent of buyers use them, and Clever released data on average real estate commission rates in the U.S. as they stand now. Clever found that on the median-priced home of $431,000, the average U.S. home seller pays real estate commission fees of about $23,662. In a survey of 630 partner agents, the average real estate commission rate in the U.S. is 5.49 percent, divided between the listing agent (2.83 percent) and the buyer’s agent (2.66 percent). The average commission rate rose from 5.37 percent in 2023. Most real estate agents typically work within a range of 2.5 percent to 3 percent. Several key factors influence this, such as property value, client relationship & circumstances, sale complexity, services provided, and market conditions. Hawaii is home to the lowest average real estate commission rate (4.78 percent), while West Virginia has the highest (6.67 percent). (Found here after 8:30AM ET, this week’s podcasts are sponsored by PHH Mortgage. From subservicing to correspondent lending, MSR/co-issue transactions, portfolio retention, reverse mortgages, and commercial servicing, PHH has solutions for the entire mortgage lifecycle. Hear an interview with Cross Country Mortgage’s Nicole Perrone on ways lenders are expanding production and capturing market share.) Lender and Broker Products, Software, and Services