The share of companies experimenting with artificial intelligence has increased, but full deployment is another matter, a Fannie Mae survey found.

The lender disclosed multimillion dollar bonuses to executives last week amid reports that it laid off staff following its Wall Street debut.

Three top executives, including CEO Kevin McMahon, left the company in the days following its sale to Constellation Software.

Most consumers see their experience in the housing market giving them more pressure than life events like dating or potty training.

Mortgage rates began the day at new multi-decade highs, but only by a small margin over yesterday.  This was counterintuitive at first glance because the bond market was in better shape this morning (something that usually connotes lower rates).  The issue was simply due to timing, however, as bonds lost quite a bit of ground yesterday and hadn’t gained it back by this morning. As the day progressed, that began to change–not at first, but eventually.  Bonds/rates took some solace in the weaker ADP Employment data out this morning, but then had an indecisive reaction to the important Non-Manufacturing Index from ISM, which came out right in line with forecasts. In a data-dependent environment, both reactions make sense.   Ultimately, bonds improved enough for a majority of lenders to offer mid-day improvements, thus bringing today’s average 30yr fixed rate just slightly below yesterday’s.  With economic data in mind, today’s reports pale in comparison to the big jobs report that comes out on Friday morning.  If it is as weak as today’s ADP data, rates could continue to move lower.  If it sings a different tune, we could be right back to multi-decade highs. 

Bonds had a scary overnight session with 10s hitting highs of 4.884 around 3am ET.  They rallied a full 15bps over the next 6 hours, most recently with help from the weaker ADP reading.  90 minutes later, the as-expected ISM data is standing aside to allow bonds to go where they please.  Big rallies are unlikely considering this week’s big to-do is still Friday’s jobs report.  Simply holding on to some of the gains from the morning would be a victory.

Bonus chart, unrelated: oil prices vs bond yields.  If we zoomed out, we’d see strong correlation since July and generally good correlation since 2015.  Many have observed that higher oil prices bode ill for inflation, thus making bond weakness a rational result.  The past 2 weeks show us that the correlation is highly inconsistent over shorter time horizons.  In fact, the same could be said for the past year and a half with oil falling by roughly 40 dollars and yields rising by more than a point and a half.

Surprisingly Calm and Logical Rally

Today’s economic data came in either flat or noticeably weaker depending on the report.  Bonds rallied as a result. This is a logical outcome, and logical outcomes seem like the exception to the rule lately.  That said, keep in mind that part of our baseline for the current rising rate trend is to see short term pull-backs every 3-4 days.  This fits the bill.  Being able to use data as an excuse makes it a no-brainer.  Nothing about the bigger picture has changed.  This week’s focus remains on Friday’s jobs report.

Econ Data / Events

ADP Employment

89k vs 153k f’cast, 177k prev

ISM Services

53.6 vs 53.6 f’cast, 54.5 prev

ISM Biz Activity

58.8 vs 56.5 f’cast, 57.3 prev

Market Movement Recap

09:07 AM Initially weaker overnight, then stronger.  More gains after ADP.  10yr down 5.6bps at 4.739.  MBS up 9 ticks (.28).

11:39 AM Some losses after ISM data, but now back in line with 10am levels. 10yr down 4.7bps at 4.748.  MBS up 7 ticks (.22).

02:33 PM Decent ground-holding continues.  MBS still up 7 ticks (.22) and 10yr down 5.2bps at 4.743.

04:13 PM Additional gains, and a modest pull-back in MBS, now up 12 ticks (3/8ths).  10yr down 6.4bps at 4.731.

I head to Vancouver, WA, this morning for a Banner Bank event and will probably have the option of Wi-Fi on the plane. How is it that NASA is able to receive data from 4.6 billion miles away, but I lose my Wi-Fi signal in my kitchen? Having a computer or smart phone has a price. I use Duck Duck Go for a search engine… Don’t think that Google doesn’t alter your search queries to reach your wallet. In other tech news, and you will forget about this note by then, your phone will blare a national emergency alert test today at 2:20PM ET, 12:20 PM MT. Of course, the messages will be accompanied by a “unique tone and vibration.” Listen for a jarring and obnoxious alarm that will immediately make you stop what you’re doing, utter obscenities, and pick up your phone to make it stop. Who can concentrate on Taylor Swift munching on football stadium dogs, or the lack of inventory and high rates, when the Las Vegas oddsmakers are making an active market in Fat Bear Week? (My 401(k) money’s on Otis!) Or maybe you’re watching the courtroom drama in NY or the machinations in Washington DC as groups come together and separate. (Today’s podcast can be found here and this week’s is sponsored by TRUE. TRUE creates accurate data that powers automation and optimizes every step of the lending lifecycle, helping lending organizations rapidly process loans, dramatically cut costs and risk, and radically improve the customer experience. Hear an interview with TRUE’s Bob Noble on practical applications for AI in today’s mortgage industry.)

As mortgage rates continued to climb, mortgage applications took their biggest hit since mid-April. The Mortgage Bankers Association (MBA) said its Market Composite Index, a measure of application volume, decreased 6.0 percent on both a seasonally adjusted and unadjusted basis compared to the previous week.    The Refinance Index dropped by 7.0 percent and was 11 percent lower than the same week one year ago. The refinance share of mortgage activity decreased to 31.7 percent of total applications from 31.9 percent the previous week. [refiappschart] There was also a 6.0 percent decrease in the seasonally adjusted and unadjusted Purchase indices. This drove the unadjusted index to a level 22 percent lower than the same week one year ago. [purchaseappschart] “Mortgage rates continued to move higher last week as markets digested the recent upswing in Treasury yields. Rates for all mortgage products increased, with the 30-year fixed mortgage rate increasing for the fourth consecutive week, up to and above 7.53 percent – the highest rate since 2000,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “As a result, mortgage applications ground to a halt, dropping to the lowest level since 1996. The purchase market slowed to the lowest level of activity since 1995, as the rapid rise in rates pushed an increasing number of potential homebuyers out of the market. ARM loan applications picked up over the week and the ARM share increased to 8 percent, as some borrowers searched for ways to lower their payments.” 

The share of residential property buyers that put themselves in the most optimistic category jumped notably in the latest edition of an RCN survey.