This week’s only marquee calendar event is Wednesday’s Fed announcement, and it’s unclear what the Fed could possibly do or say to inspire much of a reaction at this meeting. That leaves the heavy lifting to be done by the likes of the Producer Price Index (PPI) on Friday–a report that often has no impact and only occasionally fills the role of supporting actor. This morning’s Durable Goods data has perhaps even less influence and that’s good for fans of low rates because it crushed forecasts, coming in at 5.3 vs 3.7.

If you squint, you can imagine a small reaction to the tune of half a bp of weakness in 10yr yields, but that’s not enough movement to merit more than a passing glance. In any event, yields quickly returned below 8:30am levels, leaving us relatively flat in early trading.

Many servicing metrics look weaker amid lower rates although valuations can vary depending on companies’ models, operations and portfolio composition.

Trump, during his return from Davos, signaled reluctance to allow 401(k) withdrawals for home down payments, but other tax-advantaged options remain on table.

US consumer sentiment increased to a five-month high in January as Americans grew more optimistic about the economy and their finances.

The class action complaint describes, from a real estate agent’s perspective, how the company allegedly pushes borrowers toward its in-house lending arm.

Treasury moves look less about data or auctions and more about gaps and channels, with PMI next to decide direction, according to the CEO of IF Securities.

This week’s only real mortgage rate movement was seen at the outset on Tuesday morning (Monday was closed for the holiday) in response to geopolitical issues and tariff escalation potential. Rates recovered only modestly when those threats abated–a fact that had everything to do with the bond market refusing to return to last week’s levels and nothing to do with any mortgage-specific issue. If anything, the mortgage market is in the midst of stunning outperformance relative to the Treasury benchmarks. Take the ubiquitous 10yr Treasury yield, for example, which is still closer to its highest levels since early September. In contrast, average mortgage rates are much closer to their lowest levels over the same time frame. Today was the least eventful of the week with the average lender holding right in line with yesterday’s latest levels. 

Uneventful Conclusion to a Volatile Week

Bonds put in a decent day on Friday, ultimately getting back into positive territory and the best closing levels of the week.  Yields were almost perfectly in line with last Friday’s. Overall, most of the past 3 days have been uneventful, but Tuesday’s range breakout meant it was a volatile week overall. MBS and mortgage rates enjoyed ample insulation against that breakout thanks to recent outperformance driven by GSE MBS purchases (both actual and anticipated). The Fed is on deck next week, but with a zero percent chance of a rate cut. True big ticket data won’t return until the week after next.

Econ Data / Events

S&P Global Composite PMI (Jan)

52.8 vs — f’cast, 52.7 prev

S&P Global Manuf. PMI (Jan)

51.9 vs 52 f’cast, 51.8 prev

S&P Global Services PMI (Jan)

52.5 vs 52.8 f’cast, 52.5 prev

Consumer Sentiment (Jan)

56.4 vs 54.0 f’cast, 52.9 prev

Sentiment: 1y Inflation (Jan)

4.0% vs 4.2% f’cast, 4.2% prev

Sentiment: 5y Inflation (Jan)

3.3% vs 3.4% f’cast, 3.2% prev

U Mich conditions (Jan)

55.4 vs 52.4 f’cast, 50.4 prev

Market Movement Recap

09:27 AM Modestly stronger overnight, but gains erased at the open. MBS down 1 tick (.03) and 10yr up about half a bp at 4.248

11:29 AM Still mostly sideways.  MBS unchanged and 10yr basically unchanged (up 0.3bps) at 4.245

01:09 PM Near weakest levels with MBS down 2 ticks (.06) and 10yr up 1.6bps at 4.258

03:05 PM Back and forth volatility over the past hour but now back in positive territory. MBS up 1 tick (.03) and 10yr down half a bp at 4.237

Bonds rallied modestly in the overnight session. There were no notable spikes in volume or volatility–just a gradual grind that took 10yr yields roughly 2bps lower by 8am ET.  Volume picked up at the 8:20am CME open (as it usually does) and this time it brought more sellers. The net effect is a return to unchanged levels, for the most part.  There’s some data on deck with S&P PMIs, Consumer Sentiment, and Leading Indicators, but not of these are top tier market movers. The rest of the day’s momentum is more likely to be dictated by pre-weekend position squaring unless there’s an unexpected geopolitical development. 

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