A common recent refrain is that the bond market (which dictates interest rates) is having to make do without many of the most important regularly-scheduled economic reports due to the government shutdown. While this means rates must “fly blind” on many of the days that would normally coincide with these government economic reports, there are other days that still play host to top-tier non-government data. Today boasted not one–but two such reports. Unfortunately for rates, both reports were unfriendly. Rates tend to benefit from economic weakness. As such, when reports are stronger than expected, it pushes rates higher, all else equal. Today’s reports were both stronger. ADP’s monthly employment tally came in at 42k versus a median forecast of 25k. This isn’t an especially large margin of victory, but it was enough to cause weakness in bonds earlier this morning.  Less than 2 hours later, the most widely-followed report on the health of the services sector also showed stronger-than-expected results. Bonds continued to weaken after that, ultimately forcing lenders to raise rates back to levels just under those seen in late September.   If things had been even a little bit worse, we’d be at the highest rates in just over 2 months.  As it stands, we’re close enough. MND’s 30yr fixed index rose to 6.37% today.  September 25th’s level was 6.39, and that’s as high as we’ve been since September 4th. In the bigger picture, rates are still much closer to 2025’s lows as opposed to the highs, but there’s been a palpable shift since the Fed meeting at the end of October. [thirtyyearmortgagerates]

Today is a rare day when it comes to economic data.  The first Wednesday of any given month is often an important one for economic data because ISM Services often falls on Wednesday, joining ADP to create a duo with a strong track record of market movement.  In today’s case, because of the government shutdown, it means we’re getting a higher proportion of market-moving data inside a 2 hour window than any other day (or even entire week) could possibly offer. Unfortunately, neither report was bond-friendly. Thankfully though, ADP wasn’t exceptionally unfriendly. Additionally, at 48.2, ISM’s employment component remains under 50 (the dividing line between expansion and contraction) and barely beat the 47.6 forecast. These “yeah buts” are likely limiting the damage we’d otherwise be seeing, but there is nonetheless some damage to see.

Home price modeling changes hurt FOA’s third-quarter interim results but it was in the black between January and September on a continuing operations basis.

Newer automation that can serve as a wraparound to existing technology can cut servicing costs in a competitive industry, according to fintech executives.

The latest case comes after at least three other zombie lawsuits in the past year, with the owner of the loan in question claiming $173,000 in past-due interest.

While FHFA reduced most of the single-family low-income goals, the MBA wants the refinance target for Fannie Mae and Freddie Mac cut as well, its letter said.

The age at which people purchase their first home has climbed rapidly since 2021, when the median was 33, according to a National Association of Realtors survey of transactions from July 2024 through June.

Wednesday More Likely to Take Cues From Econ Data

Bonds benefited from heavy stock selling late in the overnight session. This is not the typical pattern seen these days, but it’s not uncommon to see some positive spillover into bonds when stock losses are sharp enough. In any event, it’s not something to count on when it comes to tomorrow’s motivations. For that, we actually have economic data for a change. In the absence of government agency data, if we had to pick 2 reports to carry the torch, they would be ADP employment and ISM Services PMI. Tomorrow brings us both releases and, thus, a strong chance to see data-driven volatility. 

Market Movement Recap

09:15 AM modestly stronger overnight and holding gains so far.  MBS up 2 ticks (.06) and 10yr down 1.4bps at 4.095

01:39 PM Sideways near best levels. MBS up an eighth and 10yr down 2.6bps at 4.083

04:48 PM Heading out at best levels.  MBS up 5 ticks (.16) and 10yr down 2.5bps at 4.084

The Consumer Financial Protection Bureau has seen a rapid drop in the effectiveness of its cybersecurity program, according to a new report from the Fed’s Office of Inspector General.

The agreement, if approved by a federal judge, would end litigation over two distinct cybersecurity incidents in 2021 which affected over 2 million customers.