Strong Friday For Bonds Helps Keep Sideways Vibes Intact

Friday ended up being surprisingly strong for the bond market with the best rally of the week in the long end of the yield curve.  European bonds were a key consideration early, but the quarterly rollover in Treasury futures probably added some emphasis to the gains.  10yr Treasuries fully erased the sharper losses seen Wednesday and Thursday.  Unfortunately, those sharper losses happened to be threatening the technical ceiling at 4.32%, so Friday’s rally is best described as merely keeping the broader sideways vibes intact.

Market Movement Recap

10:01 AM Slightly stronger overnight with additional gains in early trading.  MBS up 6 ticks (.19) and 10yr down 3.4bps at 4.297.

01:35 PM Steady gains all morning.  Fed comments not hurting.  10yr down 8.5bps at 4.246.  MBS up 3/8ths. 

03:16 PM Sideways near best levels with MBS up nearly 3/8ths and 10yr down 7.1bps at 4.26

“Alexa, where’s my damn package?” (Page down 3-4 times to the video.) Life is full of surprises, good and bad. Rates aren’t a surprise… The U.S. Federal Reserve can only do so much about inflation. Geo-politics are a big deal, of course, and there is nothing our Fed, tasked with maintaining economic stability in this country, can do about those. Vendors and lenders are doing what they can, cutting over-capacity and expenses. Capital markets staffs everywhere are interested in which investors have pushed out the $2,500 Freddie and Fannie month-old HomeReady credit, as well as non-QM, jumbo, co-issue, and servicing buyers. (STRATMOR’s current blog is titled, “It’s 2024: Do You Know Where Your Servicing Is?”) Speaking of capital markets, today’s TMC Rundown features Mutual of Omaha’s Matt Nyman. (Found here, this week’s podcast is sponsored by Truv. Truv lets applicants verify income, employment, assets, insurance, and switch direct deposits. Unlock the power of open finance, with Truv. Today’s has an interview with Verisk’s Kingsley Greenland on servicing for climate risk and technology solutions.) Lender and Broker Services, Products, and Software Mortgage lenders using Empower, the loan origination system (LOS) by Dark Matter Technologies, rejoice! TRUV and Dark Matter bring consumer-permissioned VOI & VOE to the Empower® LOS, reducing costs by 60-80 percent, accelerating loan cycles, and creating a better borrower experience. TRUV brings the best-in-class coverage and conversion directly from the source to your Empower LOS for income and employment verifications. Ask one of us to see a demo of TRUV in Empower® LOS!

The megalender and servicer Rocket reported annual origination volume in 2023 of $78.7 billion, a 40% decline from 2022.

At least six legal actions are currently pending against Planet Home Lending for failing to protect customer data in November 2023.

The New York bank’s AI research group has published 400 papers, according to new research from Evident; TD Bank Group’s Layer 6 unit published 14 last year. These groups work to solve real-life problems in the business units.

The 30-year average rate got closer to 7% as central bank officials dashed near-term hopes of a cut, according to Freddie Mac.

The Mortgage Bankers Association’s preliminary first half 2023 analysis shows the highest jump since the 2000s housing boom. Here’s what might happen next.

Mortgage rates continue making nearly microscopic movements in day-over-day terms, but they continue adding up.  Today’s increase over yesterday was negligible, but yesterday matched the highest levels in more than 2 months.  That leaves today with the dubious distinction of being the new multi-month high, even though many borrowers may not see meaningful changes in today’s rate quotes. There is little to observe or discuss until something significant happens.  We’re most likely to see something significant in response to  scheduled economic data.  While we get that almost every day, there are only a small handful of reports that would be considered “top tier.” At the moment, we’re waiting at least two weeks for the next true top tier report (the big jobs report on Friday, March 8th). There are a few other honorable mentions in the meantime, but not until the 2nd half of next week.  That means unless something unexpected happens, we could see small day-to-day rate movement continue.  It’s not glamorous or exciting, but it is what it is.

The Drift Continues

Bonds only had a small reaction to the stronger Jobless Claims data, despite the reference period being the same as the next NFP number.  Traders were more interested in the lower price pressures reported in the S&P PMI data.  This suggests a certain level of receptiveness to some of the other 2nd tier data that may offer a counterpoint to the most recent CPI.  But that assumes the data is friendly in the first place.  Even if it proves to be friendly, we’re waiting at least a week for the first candidate (PCE next Thursday), and then another week beyond that before getting any top tier data.  In the meantime, bonds are in drift mode, and not the fun kind.

Econ Data / Events

Jobless Claims

201k vs 218k f’cast, 213k prev

Continued Claims

1862k vs 1885k f’cast

S&P Services PMI

51.3 vs 52.0 f’cast
“input prices rose at the weakest pace since October 2020”

Market Movement Recap

08:45 AM Slightly weaker overnight. Brief selling after Claims data, but bouncing back a bit now.  10yr now up only 1bp at 4.329.  MBS down an eighth.

09:57 AM Back in positive territory after PMI data.  MBS up 2 ticks (.06).  10yr down 1.2bps at 4.307.

12:29 PM Back into weaker territory.  10yr up 1.2bps at 4.331.  MBS down 1 tick (.03).

02:39 PM Fairly flat. MBS down 1 tick (.03). 10yr up less than 1bp at 4.327.

Prospects for the spring market look a bit brighter as January numbers show an increase in both the pace of existing home sales and the size of the unsold inventory. The National Association of Realtors® (NAR) said sales of pre-owned single-family houses, townhomes, condominiums, and cooperative apartments were at a seasonally adjusted annual rate of 4.00 million. This was an increase of 3.1 percent from the December rate of 3.88 million and was 1.7 percent below the pace in January 2023.  December sales figures were also revised slightly higher, cutting the previously reported year-over-year decline nearly in half to -3.7 percent. Single-family home sales rose from 3.48 million in December to 3.6 million, a gain of 3.4 percent, and remained lower year-over-year by 1.4 percent. Condo sales were flat at an annual rate of 400,000 and were 4.8 percent lower than one year earlier. Existing home sales beat analysts’ expectations, but not by much. The consensus forecast from Econoday was 3.97 million. “While home sales remain sizably lower than a couple of years ago, January’s monthly gain is the start of more supply and demand,” said NAR Chief Economist Lawrence Yun. “Listings were modestly higher, and home buyers are taking advantage of lower mortgage rates compared to late last year.” Those listings did expand in January, up 2.0 percent to 1.01 million units. This is estimated to be a 3.0-month supply at the current rate of sales, but that estimate is virtually unchanged from that in both December and January 2023. Properties typically remained on the market for 36 days in January, up from 29 days in December and 33 days in January 2023.