At Least We Won’t Be Waiting For CPI Anymore

The present week has been a bit boring, for lack of a gentler term.  In fact, it’s been downright forgettable, but that’s often the case when rates have been on a big trip and are weighing their options for the next move ahead of a key piece of data.  There was some small chance that this week’s Treasury auctions would act as a bit of an opening act for Thursday’s big show (CPI), but today’s 10yr auction didn’t produce a measurable reaction.  Intraday momentum was weaker, but only after opening at stronger levels.  Combine that with the slow pace of selling and Wednesday is yet another day that fits the “sideways and narrower ahead of CPI” narrative.

Market Movement Recap

09:33 AM Modest gains overnight as European yields hold a ceiling.  10yr down 2.6bps.  MBS up 5 ticks (.16).

10:47 AM Well off highs with slow, steady selling since 9:30am.  MBS still up 3 ticks (0.09) but down an eighth from highs.  10yr yield down 0.4bps at 4.011.

03:20 PM Weaker through mid-day and leveling off now.  MBS down 2 ticks (0.06). 10yr up 1.7bps at 4.032.

I’m so tired of the mainstream press talking about the 2024 election, 10 months out. Given that the median age of U.S. citizens is about 38 years, one would think we could find someone under the age of 75 to be president, regardless of party affiliation. On the other end of the age spectrum, at age 34, Gabriel Attal became France’s youngest prime minister. France’s inflation rate is running at 3.7 percent, which I mention because inflation and the actions of central banks are linked, and the inflation rate and the CFPB are linked. (Whenever I mention the CFPB to my cat Myrtle she feigns indifference. Sometimes she even saunters away.) The CFPB announced the annual adjustments for inflation to the CFPB’s civil penalty amounts, as required by the Federal Civil Penalties Inflation Adjustment Act, as amended. This final rule is effective on January 15, 2024. Tomorrow we will have the Consumer Price Index, meant to broadly capture changes in the prices of goods and services; more tomorrow! (Today’s podcast can be found here, and this week’s is sponsored by Truework. By connecting every verification method into one platform, Truework helps lenders eliminate process disruptions, maintain a competitive borrower experience, and reduce the fiscal impact of verifying income.) Lender and Broker Services and Software Jonathan Spinetto COO & Co-founder at Nyfty Door, grew their business from 0 loan originations two years ago when he signed with TRUV, and is projected to hit 3,000 loans a month in 2024. NYFTY door sees conversion rates over 60 percent with Truv and is saving 60-80 percent over competitors! Contact TRUV today for your income, employment, insurance, and asset verifications.

Mortgage activity rose significantly during the week ended January 5, but it faced a pretty low bar. Loan application numbers were adjusted to account for the New Year’s holiday on the first day of the week and measured against the four days of Christmas Week. The Mortgage Bankers Association (MBA) said its Market Composite Index, a measure of mortgage loan application volume, increased 9.9 percent on a seasonally adjusted basis compared to the prior week and was 45 percent higher without adjustments. [refiappschart] The holiday-adjusted Refinance Index rose 19 percent from the previous week and 53 percent on an unadjusted basis. The two versions were 30 percent and 17 percent higher year-over-year. Refinancing accounted for 38.3 percent of total applications, up from 36.3 percent the previous week. [purchaseappschart] The seasonally adjusted Purchase Index gained 6 percent for the week and was 40 percent higher on an unadjusted basis, but activity still lagged the same week in 2023 by 16 percent.   “Despite an uptick in mortgage rates to start 2024, applications increased after adjusting for the holiday,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “The increase in purchase and refinance applications for both conventional and government loans is promising to start the year but was likely due to some catch-up in activity after the holiday season and year-end rate declines. Mortgage rates and applications have been volatile in recent weeks and overall activity remains low. ”

Mike Weinbach, a former Wells Fargo and JPMorgan leader, will replace president Chris Marshall who’s expected to retire at the end of this year.

Federal Reserve Vice Chair for Supervision Michael Barr said feedback received will be incorporated into the final version of the capital reform rule.

Overall, U.S. home prices increased 5.4% in the year ending in November, CoreLogic’s latest Home Price Index report found.

Analysis conducted by the Federal Housing Finance Agency found values coming in under contract price as often as 15% of the time in recent years, with appraisers failing to account for quickly changing market conditions.

The company took on the established vendors with its LOS. It’s now officially starting to fulfill its longtime plan to do something similar with servicing tech.

While the average 30yr fixed mortgage rate is still more than 1% below the long-term highs seen in October, it has been rising slowly and steadily in the new year.  Today’s average rate is now as high as it has been in 4 weeks.  That’s the dramatic way to say it, but things aren’t as scary when we consider rates are only about 0.2% off the December lows and that the entire drop was more than 1.4% from the October highs. [thirtyyearmortgagerates] Today’s bond market movement was sideways.  The change in mortgage rates occurred due to timing of market movements yesterday and today as well as the monthly settlement process for the mortgage backed securities (MBS) that underlie day to day mortgage rate changes. Bond traders remain focused on Thursday morning’s inflation data via the consumer price index (CPI) as the next big potential flashpoint for rate volatility.

Even Narrower Sideways Grind; No Reaction to Auction

Friday’s trading session set a reasonably wide range relative to the past few weeks. It also set the highest yields of the past few weeks.  But things have gotten increasingly sideways since then.  Yesterday’s entire range was well inside Friday’s.  Now today’s range is well inside yesterday’s.  What does it all mean?  There are only so many conclusions to draw from a sideways, increasingly narrow trend.  “Indecision” is the most obvious conclusion and that would stand to reason with December’s CPI coming out on Thursday morning.  This week’s Treasury auction cycle has some potential to to increase volatility, but that was not the case after today’s 3yr auction (essentially no reaction).

Econ Data / Events

NFIB Biz Optimism

91.9 vs 90.7 f’cast, 90.6 prev

IBD Econ Optimism

44.7 vs 42.0, 40 prev

Market Movement Recap

10:23 AM sideways to slightly weaker overnight, but buyers in charge early.  10yr down 2.5bps to 4.004.  MBS up 1 tick (0.03).

01:25 PM No major reaction to 3yr Treasury auction (reasonably strong).  10yr down 1.4bps on the day at 4.015.  MBS down 2 ticks (.06).

04:08 PM Still super flat into the close.  MBS down 1 tick (.03). 10yr down 1bp at 4.019.