Over the past three months, mortgage rate movement has been driven primarily by developments in the Iran war. It’s not that war, itself, is a consideration, but rather the implications for fuel prices and inflation. Bonds care deeply about inflation and interest rates are based directly on bonds. When inflation isn’t raging (or at the risk of raging), rates/bonds spend most of their time thinking about the economy. Lately, the data has been even-keeled enough that it hasn’t had enough of an impact to override the war’s inflation-related volatility, but today was an exception. The jobs report not only crushed expectations, but it revised the past 2 reports sharply higher as well. The net effect is that the labor market looks more like it’s finding its footing (possibly even accelerating) and less like it is still in the downtrend that characterized the post-covid normalization.  If all that was confusing, here’s the simple version. More people got jobs than expected and the market didn’t like it because it removes any argument in favor of the Fed cutting rates. Fed rates don’t equal mortgage rates, but Fed rate expectations for the future cause mortgage rate movement in the present (and Treasury movement, and stock market movement, etc.).  On a bright note, even after today’s rout, the average lender remains under the highs seen on May 19th. The Iran war is still the most important input for rates, and a confirmed peace deal would still provide relief. 

Buzz has been growing around the labor market for the past several months, but today’s jobs report went the extra mile to make it official. The job market is officially re-accelerating. Actually, the better claim would be that the jobs market is simply attempting to level off after a very long post-covid normalization. Most of today’s charts show that quite well. 
Payrolls surged to 172k vs an 85k forecast. The previous report was revised up to 179k from 115k. The unemployment rate held steady at a historically low 4.3% and dropped modestly on an unrounded basis. Volatility in the payroll count has been higher since Fall 2025. This is also apparent in the charts and it can be partially (maybe fully?) explained by the ongoing drop in survey response rates, both for consumers businesses (note the BLS data on response rates only runs through Jan/Feb).
Meanwhile, the bond market left no doubt that it is more than willing to react to econ data if that data is important enough. 10yr yields are up 5.5bps instantly and MBS are down almost half a point.

Today we’re going to learn about the facts of life. Trivia-loving basketball facts’ fans know that this is the first time the NY Knicks have led in the finals since the night of OJ’s White Bronco car chase. Homeowner’s insurance has become the “you can’t avoid it and you can’t afford it” fact of life for some homeowners in some areas. Rate is selling yoga pants. The increase in credit union’s mortgage activities is a fact and unmistakable, and you can bet CUs will continue to press their “resi” lending advantages. Lastly, and it’s a fact that people in our biz enjoy following money around, every time someone in Europe taps a card at a cafe in Lyon or a pharmacy in Munich, the transaction data leaves the continent. The data flows through servers in the United States, is processed by Visa or Mastercard, and then goes back to Europe. The money moves but the data stays somewhere in America. We’re talking about $24 trillion in annual transaction volume through those two networks. Card payments represent 56 percent of all cashless transactions in the EU. Virtually none of it runs on European infrastructure! (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 MeridianLink’s Larry Katz on how to simplify the complexity behind lending while empowering financial institutions to focus on what matters most: the people and communities they serve.)

The regulator, in response to a records request, allegedly neither confirmed nor denied whether it looked into potential violations by Veterans United.

More than half of consumers worry about money daily, despite improved budgeting habits and, according to a Ramsey Solutions survey, declining mortgage concerns.

Members of the House Financial Services Committee pressed prudential bank and credit union regulators about the potential risks of bank lending to private credit firms in a hearing Thursday.

Five new employees joined All American as mortgage bankers, two of which received a senior title, and the lender welcomed another as a senior loan processor.

If pessimism about further rate declines pans out, it could add to tricky mortgage company involvement on home equity lending, panelists at an IMN meeting said.

After hitting long-term highs on May 19th, mortgage rates dropped somewhat quickly by May 26th. Ever since then, they’ve been moving back and forth in a very narrow range. Today’s movement happened to be the good kind with the average lender cutting top-tier 30yr fixed rates by 0.03%. As always, keep in mind that mortgages are most commonly offered in 0.125% increments. When our daily rate index changes by only 0.03%, it’s because we are also measuring the underlying costs associated with any given rate and extrapolating the relative impact on interest rates. To use a crude example, let’s consider two different hypothetical rate quote options yesterday and today.
Yesterday

6.625% at a cost of $12 upfront
6.50% at a cost of $24 upfront

Today

6.625% at a cost of $9 upfront
6.50% at a cost of $21 upfront

Now pretend you only have $15 to spend for closing costs. You still can’t afford to buy your rate down to 6.5%, and you’ll still be choosing the 6.625% quote. But while the interest rate portion of your quote didn’t change, the actual interest cost improved.  Our index captures and expresses these improvements in a single number. 

Modest Gains Maintained After Intraday Slippage

Slippage is a bit less severe than leakage. Neither of them will turn a green day red, but they both erode morning gains. Today’s gains primarily followed a pre-market comment from Trump who said the US was in the middle of final negotiations to end the Iran war. Bonds hit their best levels shortly thereafter and then the slippage set in. The backtracking was more evident in Treasuries with the 10yr losing almost half of the day-over-day gains. MBS managed to hold firmer, and were still broadly in line with the middle of the AM range by 4pm. Friday brings the jobs report. While it hasn’t been as big of a flashpoint recently, we’d never rule out a reaction in the event of a big beat/miss.

Econ Data / Events

Jobless Claims (May)/30

225K vs 213K f’cast, 215K prev

Market Movement Recap

08:42 AM Decently stronger overnight and no drama so far. MBS up 7 ticks (.22) and 10yr down 4.1bps at 4.455

11:34 AM Sideways so far and just a hair weaker.  MBS still up 6 ticks (.19) and 10yr down 3.1bps at 4.465

03:31 PM Treasuries near weakest levels but 10yr still down 2.5bps at 4.471. MBS still up 6 ticks (.19).