Minimal Change After Overnight Volatility

War headlines struck back in the overnight session. Specifically, Iran struck back against various U.S. and allied sites, allegedly in response to U.S. strikes on Iranian sites. Peace prospects take an obvious hit in response to these escalations and financial markets remain willing to react accordingly. Oil prices were already moving up to the highest levels in more than a week in the overnight session and that momentum peaked at 6am ET. Treasury yields followed and then stayed broadly sideways for the duration of the domestic session. In the bigger picture, 10s are well within the 4.43-4.51 range that dominated last week. War headline sensitivity continues accounting for 90% of forward-looking volatility risk while econ data rounds out the rest. 

Econ Data / Events

ADP jobs (May)

122K vs 117K f’cast, 109K prev

ISM N-Mfg PMI (May)

54.5 vs 53.8 f’cast, 53.6 prev

ISM Services Employment (May)

47.9 vs — f’cast, 48.0 prev

ISM Services New Orders (May)

57.3 vs — f’cast, 53.5 prev

ISM Services Prices (May)

71.3 vs — f’cast, 70.7 prev

Market Movement Recap

08:17 AM Moderately weaker overnight on renewed Iran war hostilities.  Not much reaction to ADP data. 10yr up 3.7bps at 4.49 and MBS down a quarter point

10:17 AM modest improvement after ISM data, but only in Treasuries. 10yr up 2.3bps at 4.476 and MBS still down a quarter point

11:45 AM weakest levels with MBS down 10 ticks (.31) and 10yr up 4.5bps at 4.498

02:37 PM Sideways at weaker levels. MBS down 9 ticks (.28) and 10yr up 3.6bps at 4.489

Iran launched missiles at several U.S. allies yesterday afternoon and oil prices responded accordingly with a move back up to May 22nd levels. Treasury yields followed, but have generally been staying lower than the oil price correlation would suggest. 10yr yields continue holding a narrow range between 4.43 and 4.52. They’re roughly 3.5bps higher to start the day at 4.485 and MBS are down a quarter point. ADP employment came out almost right on the screws and garnered no notable bond market response. At 10am ET, we’ll get ISM Services, which is one of this week’s few reports that might have enough of an impact to influence intraday bond market volatility that is otherwise taking most of its cues from the war.

The latest and greatest with FHFA Director Bill Pulte (happy 38th birthday last week!) is that President Trump tapped him (more below), to be the acting director of national intelligence. At this point he is still running Freddie Mac and Fannie Mae. The President cited Pulte’s work at the FHFA and his role as chair of Fannie & Freddie, saying Pulte “has deep experience managing the most sensitive matters in America, the safety and soundness of the Markets, and over 10 trillion dollars at Fannie Mae/Freddie Mac, a substantial increase from where it was just 12 months ago.” For now, our industry and consumers wait on F&F to make a firm decision and move forward with “credit modernization” (aka credit score wars). VantageScore, FICO Direct, tri-merge, and single score models all have their proponents and opponents. Meanwhile, the number of lenders charging borrowers up-front for credit costs continues to limp along, meaning that the company eats the costs for loans that don’t actually fund. (Today’s podcast can be found here and this week’s ‘casts are sponsored by Experian and the Experian Verify Hub. The platform brings manual submissions in-house and consolidates post-submission activities into a single environment, aiming to provide more streamlined access, faster insights, and a more cohesive user experience. Today’s has an interview with Experian’s Sophia Cheung on simplifying and modernizing the verification process by consolidating multiple systems into a single platform, further streamlining workflows, and increasing value)

Analysts said Bill Pulte’s new additional role as spy chief will further delay GSE privatization efforts, although that could change if he formally departed.

Cotality’s fraud risk index hit its best mark since 2023, but investment and multifamily properties are driving elevated risk.

The company’s plan to reduce the servicing rights sold helped it clear one key hurdle to its agreement with Finance of America.

Federal Housing Finance Agency Director Bill Pulte won the White House’s favor by acting as an attack dog for the administration, using his agency’s data to target President Trump’s political enemies with fraud allegations, though those efforts have not withstood judicial scrutiny.

The Department of Veterans Affairs will accept the legislatively-mandated partial-claim option soon and servicing systems must accommodate it by November 28th.

Uncommonly Uneventful Day

No one will accuse us of clickbait titles today, or even clickbait analysis. There’s just not much to say. Unlike the average trading day of late, bonds held inside a very narrow range AND didn’t visibly respond to any major Iran war news (and the typical oil price volatility that follows). Oil prices definitely moved a bit, and bond yields generally followed, but the range was well inside yesterday’s. For a few minutes, it looked like bonds were going to struggle with the job openings data, but they quickly found their footing and drifted sideways into the close.

Market Movement Recap

09:36 AM Modestly stronger overnight but nearly unchanged now with MBS up only 1 tick (.03). 10yr down 1bp at 4.446

10:12 AM Some selling after JOLTS data, but stabilizing now. MBS down 1 tick (.03) and 10yr down just over half a bp at 4.45

The letter requested the agency to consider expanding the use of hybrid valuation methodologies and increasing the deployment of value acceptance.