The delinquency rate that Kroll Bond Rating Agency tracks improved last month but JER’s recent Chapter 11 filing and 2024 forecasts suggest it’s still under pressure.

The company’s latest filing provided a brief timeline of the incident that was uncovered on Dec. 20.

The segment demonstrated sustained resilience in the third quarter, growing its share of the market each month amid rate volatility, according to Corelogic.

The benchmark 10-year yield rose as much as nine basis points to 3.97%.

Mortgage rates kicked off the new year by jumping to the highest levels since December 13th.  That’s not too remarkable considering rates were also at 2 week highs heading into the weekend.  Additionally, the 2nd half of December is often a random walk for the bond market that may or may not bear any relation to the first part of January. Either way, apart from the past two weeks, rates are still much lower than they were for the past 7 months.  Today’s jump is modest to moderate in the recent context.  It’s not necessarily indicative of ongoing momentum toward higher rates.  Momentum is most likely to be determined by the incoming economic data with Wednesday and Friday being the most significant days this week.

Hindsight is frequently 20/20 when discussing recent market movement and this morning’s weakness is an example that’s worth considering.  Heading into the second half of December, our advice was that none of the movement in bonds should be taken as indicative of the market’s true intentions.  We also frequently noted inexplicable strength combined with low volume.  Now this morning, we’re right back to levels that prevailed on the last few liquid/high-volume trading days of the first half of December.  Viewed in that light, one could argue that it’s only logical, but was it?
At first glance, yes, one could argue it was logical.

But here’s the catch: all too often, we can observe that the present set of variables argues for a logical result, but that logical result doesn’t reliably occur. In other words, logical outcomes don’t necessarily increase predictability.  All we can say is that this outcome makes good sense in hindsight.  It also makes sense given the reality that additional improvement in bonds will require this week’s economic data to come in weaker than expected.  With that data beginning tomorrow, and with the recent trend having been bullish, it’s no big deal to see a bit of a pull back.
To be clear, we did have a few economic reports this morning, but the bigger ticket data starts tomorrow with JOLTS, ISM, and Fed Minutes.  The biggest data hits on Friday in the form of the jobs report.

Bond Selling Suggests Caution, But We’re Still Data Dependent

The bond market started off the new year with the highest volume since December 15 and the highest rates in at least as long.  In fact, today’s domestic session high of 3.974 was almost perfectly in line with the 3.971 back then.  This could be taken as an indication that the late December bullishness is giving way to something more defensive in January.  The other way to look at it would simply be that yields were never being true to themselves down in the 3.8% range.  That was just the product of the holiday trading environment and now we’re getting back to the business of deciding whether or not we’ll remain under 4%.  Call us old fashioned, but the incoming data will likely play the biggest role in that determination. 

Econ Data / Events

S&P Manufacturing PMI

47.9 vs 48.2 f’cast, 49.4 prev

Market Movement Recap

09:31 AM much weaker overnight.  MBS down 3/8ths and 10yr up 8.2bps at 3.948.

12:18 PM Off the weakest levels.  10yr up 7.5bps at 3.941.  MBS down 10 ticks (.31).

03:39 PM sideways near middle of today’s range.  MBS down 11 ticks (.34).  10yr up 7.7bps at 3.943

Our Federal Reserve doesn’t control events around the world, like a ship being stuck in the Suez Canal, or the current Red Sea geopolitical aggression, which can impact our inflation rate or how much money companies or individuals earn. The world changes. What was it like going to a concert 60 years ago? This will give you an idea. Concerts have become huge moneymakers. Along those lines, but in a different industry, the Financial Times reports that JPMorgan took almost a fifth of total US bank profits in the first nine months of 2023! Too big to fail? For those playing along at home, the ten largest banks, when that concert was filmed, were Bank of America, Chase Manhattan Bank, First National City Bank of New York, Chemical Bank New York Trust Company, Morgan Guaranty Trust Company, Manufacturer’s Hanover Trust Company, Bank of California, Security First National Bank, Banker’s Trust Company, and First National Bank of Chicago. Now the list is JPMorgan Chase, Bank of America, Citi Bank, Wells Fargo, US Bank, Truist, PNC, Goldman Sachs, Capital One, and TD Bank. Whether it is banking or mortgage lending, the landscape is always in flux! Today’s podcast can be found here, and this week’s is sponsored by the STRATMOR Group, the data-driven mortgage advisory. At STRATMOR, insights and knowledge are applied to guide mortgage clients to make sound strategic decisions and take actions that improve their success. I go on the podcast to put a wrap on 2023 and look ahead to 2024 for the mortgage industry.

The share of relocators was 23.9% in November, the first annual decline recorded by the brokerage but still well above the 19% pre-pandemic rate.

The real estate investment trust — which counts the private equity firm C-III Capital Partners among its top shareholders — owes more than $100 million to creditors but has less than $50 million of assets, according to a Chapter 11 petition.