March ended with a streak of some of the flattest day-over-day changes in mortgage rates on record.  It was all but certain that the new week/month would bring a change to that sideways trend, but the reality has immediate and abrupt. Right at the start of domestic trading hours, bonds began to lose ground.  This means that traders were selling and yields were rising.  Higher yields in bonds equate with higher mortgage rates, all other things being equal. Frustratingly, there were no obvious explanations for the initial push toward higher rates this morning.  Some market watchers may have pointed to inflation data that came out last Friday when the market was closed, but if that was the motivation, it wasn’t obvious to the billions of dollars in trading that had taken place before yields began to rise. What we  can  confirm is that this morning’s economic data made things worse for rates. Both S&P and ISM released their manufacturing indices for March.  Both were higher than expected and both mentioned higher prices. Prices are critical at the moment because inflation is keeping rates elevated.  If inflation refuses to resume the downward trajectory that was in place through the end of 2023, rates won’t have a compelling reason to rally.   The net effect of this morning’s bond market rout was an increase of more than an eighth of a percent for the average mortgage lender on top tier 30yr fixed loans.  

Positioning and Data Deliver Double Whammy For Bonds

There were no whammies last week as bonds drifted sideways to slightly stronger in a narrow range.  The new week/month began with an unpleasant double whammy, unfortunately, due to positioning and economic data.  Traders began selling in waves right out of the gate.  The first two waves (8am and 8:20am) were best explained by traders closing out last week’s 3.5-day weekend protections and other traders opening new positions for the month of April. Additional selling followed the stronger PMI data (both from S&P and ISM) which included higher price components.  Longer-dated Treasuries fared much worse at first, but short-term yields closed the gap a bit by the afternoon.  All told, 10yr yields jumped more than 12bps to close just over the 4.32% technical level.   MBS lost roughly half a point by 4pm. 

Econ Data / Events

ISM Manufacturing PMI

50.3 vs 48.4 f’cast, 47.8 prev

ISM Prices Paid

55.8 vs 52.7 f’cast, 52.5 prev

Market Movement Recap

09:20 AM Roughly unchanged overnight, but sharply weaker since 8am, especially for the long end of the curve.  MBS down 5 ticks (.16) and 10yr up 5.6bps at 4.257.

11:03 AM Bigger sell-off after ISM data.  MBS down almost half a point.  10yr up 11.5bps at 4.316.

01:04 PM Fairly flat at the weakest levels.  MBS down a half point.  10yr up 12.5bps at 4.326

There are two times of morning that could be considered “the open” for the bond market.  As far as the futures market is concerned, it’s 8:20am as that has long been the opening bell for Treasury futures at the CME.  Since there is no centralized exchange for cash Treasuries, it’s really any time that the market decides.  In fact, this is often a moving target some time shortly after 8am.  Recently though, “8am sharp” has seen a surge of trading activity and movement.  Today is one of those days.  It’s likely amplified by fact that it’s the first trading day of a new month/quarter, which can always bring some random volatility and/or extra momentum in one direction or another.  Today so far, that momentum has been in an unfriendly direction.

In real Commentary news, many folks who read this Commentary are workin’ for a livin’, and many of them are managers. On a recent Truv Zoom call, Lower’s James Duncan opined on how things change within companies. As he put it, if change is driven from the top down, it would be termed “leadership.” If change is driven from the bottom up, it would be termed “empowerment.” Either way, change is hard, and companies need to ask, “What is the reward?” But James suggested that perhaps the better question is, “What is the alternative?” Be thankful you’re not in the commercial sector. Banks don’t want to declare commercial loans as nonperforming because that hurts their balance sheets. So, there’s been refinancing & restructuring on more favorable terms than some anticipated & more than underlying economics justify… What some observers sarcastically call “extend & pretend.” (Found here, this week’s podcasts are sponsored by Loan Vision. With Loan Vision, the mortgage banking industry’s premier mortgage accounting solution, you can take your accounting department from “cost center” to “revenue generator,” operating more efficiently and profitably. Hear an interview with Bonzo’s Jason Perkins on customer relationship management (CRM) technology that helps companies manage and analyze interactions with customers and potential customers.) Lender and Broker Services, Products, and Software Lending marketing, sales, and operations leaders! This is what your teams need to hear right now to increase volume and run a more efficient business. Greg Sher, Managing Director, NFM Lending, Steve Majerus, CEO of Synergy One Lending, Brian Vieaux, CEO of Finlocker, and Richard Grieser, VP of Marketing at Truv, are going to share strategies and real examples of how you can fill the top of your funnel with a more informed and prepared borrower before loan application, during the application, and after closing. You’ll also hear firsthand how your technology can work with you to improve the borrower experience, as opposed to against you! Come join us on April 10 at 1 pm CT and invited your teams!

KBRA recently assigned low-end investment grade designations to Freedom Mortgage and Pennymac transactions that involve interests in Ginnie Mae mortgage servicing rights.

Higher costs than expected, not just for the mortgage but for repairs and more, have recent buyers’ regretting their purchase, Clever RE and Redfin found in separate reports.

Affordability challenges also have some aspiring homeowners taking second jobs or looking to draw from retirement savings, according to Redfin.

New guidelines regarding buy-side and sell-side real estate agent compensation are set to go into effect this summer.

Initial analyses of Home Mortgage Disclosure Act data show UWM ahead in 2023 loan numbers and dollar volume, but Rocket’s market share still looks competitive.

The lender recorded a $59 million net loss in the fourth quarter, an 83% improvement from its third quarter performance.