Merchants Bancorp says it will sell a total of four branches to two buyers and focus more on its core residential mortgage lending business. Banks of all sizes have been pruning branch networks in recent years.

Current affordability challenges appear to have spurred the Department of Housing and Urban Development affiliate to rectify a concern dating back to 1990.

Reeling from four hurricanes in 2020 and 2021 that caused $23 billion in damage, the state is undergoing an insurance calamity that is harming its economy and even reducing its population.

More than half of 526 respondents to a Markets Live Pulse survey said that personal consumption — the most important driver of economic growth — will shrink in early 2024, which would be the first quarterly decline since the onset of the pandemic.

Flattest Trading Day in 2 Years

Bonds began the overnight session in slightly weaker territory and held almost perfectly flat for the rest of the day.  In terms of Asia+Europe+US hours, it was the flattest trading day in 2 years.  With that in mind, it doesn’t make much sense to analyze the reasons for movement nor the significance of its scope.  All that’s left is to ask what the implications are.  The answer could be as simple as as the empty calendar ahead of high consequence data later in the week, but it’s not as if that hasn’t happened before. Sometimes flat is just flat.

Market Movement Recap

09:31 AM Bonds opened weaker in Asia and have been mostly flat through the domestic open.  10yr up 3.2bps at 4.292.  MBS down just over an eighth.

11:46 AM Sideways to slightly stronger since the last update.  MBS down 3 ticks (.09) and 10yr up 2.8bps at 4.288

02:17 PM 10yr up 2.4bps at 4.284.  MBS down 2 ticks (.06) and illiquid at times.

03:47 PM Unchanged from the last update.  Excruciatingly sideways.

One of the topics here in Tennessee is how lenders can help real estate agents or clients. Wanna maybe help your client or favorite real estate agent grappling with inventory? HUD has a “Home store” of houses. Worth a shot at 3.5 percent down properties! For something to really start your synapses firing on a Monday morning ahead of a five day work week, the CEO of the California MBA, Susan Milazzo, sent, “The latest effort to pass legislation to address California’s insurance crisis has died. Assembly Democrats felt that the bill favored insurance companies over consumers, and they wanted to add a provision that would prohibit insurance companies from not renewing any business through the end of next year. With no real guarantee of when the commissioner would do the emergency regulations or the contents of those regulations, it amounted to a poison pill.” (More insurance news below in the “disaster” section.) (Today’s podcast can be found here and this week’s is sponsored by SimpleNexus, an nCino Company, and award-winning developer of mortgage technology for modern lenders. Hear an interview with J.D. Power’s Craig Martin on the U.S. Mortgage Servicer Satisfaction Study. Lender and Broker Software and Services Credit unions, it’s time to make your mark at the 2023 ACUMA Annual Conference from Oct. 1 – 4. Secondary marketing experts from Optimal Blue will be on-site and ready to discuss ways you can up your game and do even more to maximize success. Whether you’re working to get your members the best possible rates, trying to more effectively mitigate pipeline risk, or aiming to better understand the value of your MSR assets – we’re ready to help you reach your goals. Stop by our booth to learn more.

At times over the past 2 years, the Consumer Price Index (CPI) has been the most important economic report on any given month and has had a bigger impact on bonds than the mighty jobs report.  Now that job creation has settled back into the 200k-ish range, it has been more tradeable.  Meanwhile, CPI has failed to inspire on several recent occasions.  Will this week prove to be another example?  Odds are that the lack of inspiration had more to do with the numbers coming in close to consensus. If this week’s numbers are far enough from forecasts, there’s no reason to doubt CPI’s market moving power–especially with the uptick in energy costs and the Fed on deck next week. 

While it’s impossible to predict the future when it comes to financial markets, it’s usually possible to identify the events that have higher potential to cause bigger swings. Other times, volatility strikes on days when it wasn’t entirely expected. That’s how this past week began.  After Monday’s holiday closure, rates jumped higher on Tuesday morning without warning.  What would a “warning” have looked like?  It could be as simple as the presence of a scheduled economic report with a history of causing a volatile market response.  Tuesday had none of those, but it did have a legitimate market mover pulling the strings behind the scenes. The puppet master in question is a bit esoteric without a quick refresher:
Interest rates are based on bonds.
The Fed sets a target for the shortest-term bonds, but the market trades it out from there.
There are all kinds of bonds. US Treasuries are government bonds.  Mortgage backed securities (MBS) are bonds tied to mortgage cash flows.  Municipal bonds finance local government operations.  Corporate bonds finance various spending/investment needs for large companies.
All these bonds are slightly different in their risk and reward, but they are all part of the same asset class in the eyes of investors.  Specifically, bonds are a “fixed income” investment that allow investors to receive a fixed schedule of repayment with interest.  

Federal Reserve Chair Jerome Powell said inflation relief from the housing sector is “in the pipeline” but some say strong underlying demand and an inadequate housing supply could disrupt future rate pauses or cuts.

Decreased availability of bank capital for new commercial construction helped slow activity from the previous nine quarters, according to a new report.