Large U.S. companies with global footprints, including many in the financial services space, have developed their privacy practices to comply with the EU’s Global Data Protection Regulation. Many observers expect this will be the case with AI as well, writes the Senior Regulatory Counsel at Covius Compliance.

Quiet Conclusion to a Raucous Week

For a short while this morning, it looked as if bonds would break up and over the recent 4.32+ ceiling in 10yr yields, but trading calmed down and trended sideways in a narrow range for the rest of the day.  It was a calm conclusion to what has otherwise been the most damaging week since October.  But don’t let the calm fool you.  It’s likely to be calm before the storm considering next week brings a new Fed dot plot for the first time since December 13th.

Econ Data / Events

Import Prices

0.3 vs 0.3 ‘cast, 0.8 prev

NY Fed Manufacturing

-20.9 vs -7 f’cast, -2.4 prev

Industrial Production

0.1 vs 0.0 f’cast, -0.5 prev

Consumer Sentiment

76.5 vs 76.9 f’cast, 76.9 prev

Market Movement Recap

10:18 AM Modestly stronger overnight, but weaker during domestic hours.  10yr up 2bps at 4.312.  MBS down 9 ticks (.28).

12:38 PM Modest push back after hitting lows around 10am.  MBS now down only 6 ticks (.19) and 10yr up only 1bp at 4.3.

02:26 PM Sideways at barely weaker levels.  MBS down 7 ticks (.22) and 10yr up 1.2bps at 4.304

04:41 PM Same levels as previous update.  Same sideways drift.

Back in late 2023, we got in the car with the Federal Reserve with the promise of a trip to our favorite place: the land of lower interest rates. In 2024, we keep asking “are we there yet?” The more we ask, the farther we seem to be from the destination. This trip began with all the best intentions. Softer inflation and cooler economic data led the Fed to expect an opportunity to cut rates several times in 2024.  The Fed communicated as much in mid-December.  Markets took things a step further with futures contracts pricing in 6 cuts by the end of the year.  “6 rate cuts” was a refrain that echoed throughout the mortgage and housing industries.  Suddenly, too many people were risking disappointment by not understanding the HIGHLY conditional logic behind the 6 cut mantra. It wasn’t necessarily a mistake for the market to get so far ahead of the Fed’s official outlook.  After all, the Fed has a history of cutting rates MUCH faster than its projections suggest.  But the decision would ultimately be dependent on continued progress on inflation, and more economic cooling. With the release of this week’s inflation data, we now have two consecutive months that raise serious objections to the notion that the Fed will be able to cut any time soon.   This is a chart of the core Consumer Price Index (CPI) in year over year terms.  This is the inflation metric that the Fed wants to see at 2% and they’ve been clear in saying they can cut rates if they’re confident that we’ll get there.  It shows clear, substantial progress toward that goal:

Just once, I want a username and password prompt to say, “Close enough.” Speaking of technology, this weekend Robbie and I head to Las Vegas for the ICE Experience 24 events (led off by the Lender Toolkit Supercar Experience). One big topic is bound to be constantly shifting origination channels, and the current STRATMOR Group blog is titled, “Wholesale Channel Overview and Outlook.” Another topic will be using technology money efficiently and cost-effectively. Most, if not all, lenders and vendors are continuing to look at costs critically as part of their foundation for profitability. If you’re a capital markets person, how would you like to implement, “dynamic pricing?” Pricing issues are everywhere, and certainly rising homeowners and auto insurance prices are problems for borrowers and everyone. (Found here, this week’s podcast is sponsored by Lender Toolkit. With Lender Toolkit’s AI-powered AI Underwriter and Prism borrower income automation tools, you’ll be able to get loans approved in under two minutes. Hear an interview with NerdWallet’s Elizabeth Renter on affordability for first time homebuyers.) Lender and Broker Services, Products, and Software The mortgage industry is famously cyclical. Are your cash management and accounting processes powerful and agile? Many IMBs invest heavily in front-end loan origination systems, but managing your back-end processes requires a knowledgeable partner dedicated to the mortgage business. Western Alliance Bank offers powerful tools designed to help keep operations running smoothly, including robust payment processing, including lockbox solutions to reduce exceptions for servicers, corporate credit card with an ACH feature for large expenditures, commercial card consortium so as you spend more, your revenue share increases, and integrations with key technologies to streamline your processes. Most importantly, we sit down with you to understand your needs and serve as a sounding board for how automation can serve you. Contact Treasury Management specialist Chris Martin (480) 341-5483 or bankers Mark Short (469) 702-6212, Nick Richards (646) 708-1211, Nicole Avey (720) 633-4759, Elizabeth Mix (480) 329-2122 and Jim Karr (626) 390-8534. Western Alliance Bank, Member FDIC.

This morning’s line-up of econ data is certainly not the most relevant to the bond market, but the NY Fed Manufacturing index has registered an impact at times.  This is not one of those times.  While volume suggests traders waiting to make trades at 8:30am, there was no bias toward higher or lower levels at that particular time.  Some selling pressure was already in place starting at 8am and more selling kicked in just before 9am.   The other data wasn’t relevant, but the big miss in NY Fed (-20.9 vs -7.0) arguably could have been.  The fact that it offered no help is a sign of the troubled times for bonds.  

Cost of property coverage rose more than 55% over the last five years and it’ll likely keep rising through 2024, a report from Guaranteed Rate found.

The troubled Long Island-based lender laid out steps that it’s taking to improve its loan review process. The remediation efforts follow a massive loan provision last quarter, which led to a management shakeup and a $1 billion rescue led by former Treasury Secretary Steven Mnuchin.

The average 30-year fixed mortgage rate for conforming loans fell, according to Freddie Mac, even as the 10-year Treasury yield rose nearly 18 basis points from the start of this week.

A legal action accuses the department of not automatically refunding mortgage insurance premiums when a borrower terminates their FHA-insured mortgage early.

Gen Z and millennials are more willing to take a higher mortgage rate in order to buy a home than Gen X and baby boomers, the ServiceLink report found.