The bond market that underlies mortgage rates has had several decent days in a row with trading levels in excellent territory relative to the past two months and minimal volatility day-over-day.  Today added to the winning streak amid another lack of meaningful economic data and an absence of any new news in the scheduled release of the minutes from the Fed’s policy-setting meeting 3 weeks ago. In this sort of “holiday light” trading environment, bonds are still moving, but those movements are a bit more random and the range is a bit narrower.  Today could have gone either way.  If bonds had lost ground, the average mortgage lender might have quoted microscopically higher rates.  But because the random drift resulted in modest bond market improvement, the average mortgage lender was able to offer slightly lower mortgage rates compared to yesterday. This is a bit of a short-term milestone due to the fact that yesterday’s rates were right on the cusp of officially breaking the lowest levels in 2 months.  As such, today’s improvement makes it official.  You’d have to go back to September 20th to see anything lower. In the even bigger picture, any progress at this stage helps to build the sense that the highest rates are behind us and that the bond market is cautiously considering a long, slow descent back to levels that should be a lot more palatable to the housing market.  It’s WAY too soon to confirm such things, but at least we can say that the past month would certainly fit the pattern of a long-term ceiling. 

Modest, Decent Gains, But Not Many Surprises

The bond market continues mostly adhering to expectations for narrower trading ranges and less directional movement against the backdrop of a holiday-shortened week without any major market movers.  But wait! What about the Fed Minutes? Wouldn’t this classify as at least a POTENTIALLY major market mover?  At times in the past, sure, but at present, not so much.  We were comfortable asserting as much even before the Minutes came out and now that they’re in the rearview, their insignificance is clear.  The market has clearly shifted gears into holiday mode with light volume and liquidity greasing the skids for random volatility without any fundamental justification.

Econ Data / Events

Existing Home Sales

3.79m vs 3.9m f’cast, 3.95m prev

Market Movement Recap

09:36 AM Best levels of the day after initial weakness.  MBS up an eighth and 10yr down 2.2bps at 4.402.

01:36 PM Some weakness ahead of Fed minutes.  MBS back down to ‘unchanged’ (off just over an eighth from the highs).  10yr up 1.3bps on the day to 4.437 (new highs for the day).

02:31 PM No real reaction to Fed Minutes.  10yr roughly unchanged at 4.426.  MBS up 3 ticks (0.09).

03:17 PM MBS getting squeezed a bit in a good way.  6.0 coupons up 7 ticks (.22) and 10yr yields down 1.4bps to 4.41.  

Existing home sales achieved their lowest annual level in ten years in September, and now appear to have doubled down. The National Association of Realtors® (NAR) said sales of pre-owned single-family homes, townhouses, condominiums, and cooperative apartments fell another 4.1 percent in October to an annual rate of 3.79 million homes. This is 14.6 percent below the 4.44 million level of sales in October 2022. Single-family home sales decreased to a seasonally adjusted annual rate of 3.38 million, a 4.2 percent decline from 3.53 million in September. Condo/co-op sales fared slightly better, slipping only 2.4 percent month-over-month to an annual rate of 410,000 units. Both single-family and condo/co-op sales were 14.6 percent lower than the same month last year. [existinghomesdata] Analysts had expected a less drastic decrease from the 3.95 million level of sales in September. Both Econoday and Trading Economics had consensus estimates of 3.9 million. “Prospective home buyers experienced another difficult month due to the persistent lack of housing inventory and the highest mortgage rates in a generation,” said NAR Chief Economist Lawrence Yun. “Multiple offers, however, are still occurring, especially on starter and mid-priced homes, even as price concessions are happening in the upper end of the market.” There were 1.15 million housing units available for sale at the end of October. This is an increase of 1.8 percent from the previous month but 5.7 percent fewer homes than a year earlier. Unsold inventory sits at a 3.6-month supply at the current sales pace, up from 3.4 months in September and 3.3 months in October 2022.

There’s a reason we haven’t been mentioning this week’s release of the Fed Minutes as we lament the absence of significant scheduled market movers.  Simply put, we’re largely past the phase of the rate hike cycle where the minutes can tell us any more about the Fed’s outlook than the Fed can tell us itself via speeches, press conferences, etc.  Of course, there can always be a brief, volatile reaction to any Fed communication, but it would be quite surprising to see this particular event doing anything to reshape the rate narrative in any meaningful way. 
We know the Fed is “done hiking unless the economic data and inflation metrics pick back up in a way that suggests more tightening is needed.”  And even then, the Fed would then have to weigh the extent to which sufficient tightening may already be in the pipeline.  Long story short, we’re not expecting any fireworks, and even if we see a few, we’re not expecting them to start any fires.
To be perfectly fair and balanced with respect to our “narrow range” outlook for the week, it’s worth noting that the narrowest version of the range has given way to a slightly wider version as yields press back toward last Friday’s lows.  This doesn’t really change the gist of “sideways and less volatile” ahead of the next big round of data, but it does mean we get to wait things out at levels that are even better than hoped.

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Bonds have broadly surged in November after the latest U.S. consumer price index report showed essentially no changes in overall prices from the prior month, implying the Fed might be close to getting inflation under control.

News reports of the negative impact to borrowers from the partial claims program’s discontinuation, and a letter from Senate Democrats, appear to have prompted the statement.

Thirty percent of single women borrowers were not confident going into the mortgage experience, with a quarter of them claiming not to trust their loan officer, a Maxwell survey found.

In her first remarks since the release of a sweeping report on the banks, Federal Housing Finance Agency Director Sandra Thompson urges them to strengthen underwriting and communication with their members’ regulators.

Only 65.8% of surveyed households said they would be able to come up with $2,000 if an unexpected need arose within the next month.