The Federal Reserve, Federal Deposit Insurance Corp. and Office of the Comptroller of the Currency Tuesday issued the first in a series of requests for comment on all aspects of the regulatory apparatus as part of a required decennial review.

The Independent Community Bankers of America, American Bankers Association and other groups filed a lawsuit arguing that recent reforms to implementing regulations for the Community Reinvestment Act exceed statutory authority.

Magical Mystery Rally

Whereas the bond market had obvious, individual motivations for all phases of the sharp sell-off over the previous two business days, today’s rally was far more mysterious.  To be sure, a 7bp rally in 10yr Treasuries doesn’t need any substantive fundamental justification if it follows hard on the heels of an almost 30bp sell-off, but it’s always nice to keep track of what matters.  In this case, it may be seller exhaustion and 2024’s technical ceiling matters more than fundamentals.  We also noted correlation between geopolitical headlines and the sharpest leg of today’s rally, but remain unsatisfied in the logic required to connect those dots.  Satisfaction aside, we’ll take the rally and hope to see validation in Wednesday’s 10yr Treasury auction.

Market Movement Recap

09:56 AM Modestly stronger overnight.  Additional gains after 9:30am NYSE open.  MBS up almost a quarter point.  10yr down 2.9bps at 4.131.

01:11 PM Solid gains into the PM hours and holding near best levels.  MBS up 9 ticks (.28) and 10yr down almost 7bps at 4.092%

02:42 PM Holding best levels of the day with both MBS and Treasuries unchanged from the last update.

03:59 PM Heading out at the best levels with MBS up 10 ticks (.31) and 10yr yields down 7bps at 4.089.

The past two business days (Friday and Monday) accounted for the 3rd largest increase in mortgage rates since March 2020.  Friday, specifically, was the fastest single-day spike in more than a year and 5th biggest spike since March 2020.  Even when massive fundamental change is happening, rates don’t tend to maintain such a pace. At present, it would be a stretch to say that massive fundamental change deserves much credit for the past 2 days.  If anything, it was more of an adjustment to surprisingly strong economic data.  A slew of Fed speakers has confirmed as much during this time.  They’ve been reasonably unified in saying they still expect rate cuts in 2024, but not quite as quickly as the market had been expecting at the beginning of last week. With all of the above in mind, it’s not a huge surprise to see a break in the unpleasant action.  While we can’t yet be sure that rising rate momentum is finding a limit as opposed to simply taking the day off, we can at least enjoy the day off. Specifically, the average top tier 30yr fixed rate fell back below 7% today after cresting that level for the first time in more than a month yesterday.  Interestingly enough, the recovery was accomplished without any major underlying motivation.  This could speak to the absence of that “massive fundamental change” mentioned above (which would suggest less volatility relative to last week in the coming days).  

When bond yields began spiking abruptly after last Friday’s jobs report, one of the immediate saving graces was the fact that the late January highs were still a fair amount higher.  Then on Monday, “fair” dwindled to “microscopic” after the ISM services data and additional snowball selling.  10s stopped just shy of 4.18%, effectively right in line with the 4.196% from January 19th. In addition to being the 2024 highs, 4.19% (or close to it) was a frequently visited ceiling 2 weeks ago.  This is the way “key levels” are identified and today’s trading is only adding to the case.  10s topped out at 4.17% overnight and have been making steady progress lower since then–all the in absence of any major fundamental motivation.

Every month we receive statistics showing how prices are going up, or down, and our Federal Reserve is continually mentioning controlling inflation which in turns helps mortgage rates. Inflation has finally impacted birthday celebrations. “Steakhouses Are In. Steak Is Out: Many customers are looking for a splashy night out with less red meat and lower prices.” I like chicken, so I received some good news. (Gallus domesticus fans may want to visit Prince’s south of Nashville.) The price of chicken is poised to fall considerably, helping inflation and in turn, in a small way, mortgage rates, as a glut of feed hits the market. Feed costs are about 60 percent of the expenses of raising birds, and the rising need for biofuels, like that made from soybeans, means that there is poised to be much cheaper feed on the market. A byproduct of making soybean oil from soybeans is soymeal, which is used as chicken feed. The levels of soymeal produced in the U.S. is expected to only go up, which will keep prices for chicken and pork lower than otherwise. See how these things work? Today’s Commentary podcast can be found here and this week’s is sponsored by Vesta, the new, modern Loan Origination System (LOS) which helps lenders reduce their costs to originate and improve their ability to integrate with new technologies in the ecosystem. Hear Part Two of an interview with Curinos’ John Sayre on Q4 origination trends and meaningful data in the mortgage industry. Lender and Broker Software, Products, and Services

First National Bank of Pennsylvania, a unit of FNB Corp., ran into trouble in connection with North Carolina operations it acquired from Yadkin Financial in 2017.

The top five states have an average number of home improvement loans for every 100,000 owner-occupied housing units of 688.5 and an average loan amount of $119,973.

The integration of Rocket’s AI-backed tool on Apple’s newest product, Apple Vision Pro, is the second tie-in with the tech giant in the last three months.

There will still be local oversight. Incentives to maintain registered offices will include listing in an online lender search tool and access to certain data.