The senior vice president for capital markets at the Housing Policy Council died Saturday after sustaining critical injuries a week prior.

Big Losses Get Bigger After ISM Data

Bonds sold off again today, but this time in several distinct waves.  The first wave occurred instantly as trading opened in the overnight session.  10yr yields jumped immediately from 4.02 to 4.08 as investors reacted to Powell’s 60 Minutes interview (which reiterated that strong econ data means the Fed is in no hurry to cut).  Stronger econ data in Europe pushed EU yields higher, kicking off the 2nd wave of selling and taking 10s to 4.12.  Then in U.S. hours, a broadly stronger ISM Services PMI kicked off the 3rd wave, taking yields over 4.16% by the 3pm CME close.  With that, bonds are basically back in line with January’s highs unless you ask shorter-term bonds (more influenced by Fed Funds Rate expectations) which are the highest since the Dec 13th Fed announcement.

Market Movement Recap

09:18 AM Sharply weaker overnight, with losses out of the gate and additional weakness in Europe.  10yr up 10bps at 4.119.  MBS down almost half a point in 5.5s and just over a quarter point in 6.0 coupons.

10:35 AM Additional losses after ISM data.  MBS down over half a point.  10yr yield up 13.2bps at 4.154.

02:05 PM Weakest levels just before 11:30am.  Sideways since then.  MBS down almost half a point in 5.5 coupons and 10 ticks (.31) in 6.0 coupons). 10yr up 13.8bps at 4.16%

Last Friday was the worst day for mortgage rates in over a year in terms of day-over-day movement (October 19th, 2023 remains the worst day in decades in terms of outright levels with 30yr fixed rates over 8%). Monday added insult to injury with another sharp increase that took the average top tier conventional 30yr fixed rate back over 7% for the first time since December 12th. In both cases, the most relevant catalyst was an upbeat economic report.  We already know that it was the big jobs report that did the damage on Friday.  Today’s rate rout came courtesy of the ISM Non-Manufacturing PMI (aka ISM Services).  While it’s lesser-known than the jobs report, ISM Services is one of only a handful of other reports worthy of sharing the stage as a supporting actor.  When it comes in much higher or lower than expected, rates almost always react. Rates are more sensitive than normal to economic surprises at the moment and they’re on veritable high alert after last Friday.  Today’s ISM data was only moderately stronger than expected at the headline level, but some components of the report (employment and prices) were much higher than last time.   After the data, the bond market (which dictates rates) immediately moved to the weakest levels of the day.  Weaker trading levels in the bond market prompted mortgage lenders to set their rates much higher today versus Friday afternoon.  In these two business days, the average lender is more than 0.40% higher in terms of top tier 30yr fixed rates versus Thursday afternoon.

The bond market continues providing a great example big movement in the “little picture.”  Right out of the gate, if we examine just a slightly bigger picture, we find yields not even all the way back to the closing levels from just over 1 week ago.  The little picture is quite a bit more alarming, with the largest single-day sell-off in months on Friday, and another big sell-off to start the new week this morning.

“If I had a dollar for every girl that found me unattractive, they would eventually find me attractive.” New York Community Bancorp, buyer of Flagstar (2022) and Signature Bank (2023), wishes it had a few more dollars: it announced a shock earnings release and 70 percent dividend cut in response to a steep increase in credit provisions. Its share price has plummeted over the past week out of fear that round two of the banking crisis from last year might be approaching. Yes, NYCB owns Flagstar Bank, a long-time staple in the residential lending biz. NYCB added to reserves and cut its dividend as assets crossed the $100B threshold, while commercial real estate concerns compounded investor worries. Investors, analysts, and the rating agencies will be piling on. 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 one of an interview with Curinos’ John Sayre on Q4 origination trends and statistics. Lender and Broker Software, Products, and Services “This February, your automation strategy needs love too. If you’re looking to problem-solve disjointed underwriting processes, we have the perfect resource for you. Tune into ICE Mortgage Technology’s recent webinar to hear new perspectives from some of the industry’s top automation experts that will inspire you to turn ideas into actionable plans. Watch now for their top tips on leveraging automated underwriting, including where to start, what to prioritize and how to gain buy-in with your team.”

The company, and Rocket, had been targets of United Wholesale Mortgage’s All-In campaign, which punished independent brokers who did business with the UWM rivals.

Multiple mortgage companies are returning to the unsecured debt market for the first time since 2021, according to a new Fitch report. Here’s why.

But Fannie Mae and Freddie Mac conducted no private-market sales of nonperforming loans early last year as adjustments were made to the program.

It’s possible that the remaining litigation could be resolved by mid-year, wrote Keefe, Bruyette and Woods analyst Ryan Tomasello

The annual reconciliation shows nonbank cuts were deeper than the initial read suggested, and comes as the latest numbers for broader employment show a surge.