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

Two separate programs providing as much as $10,000 in assistance are open to eligible borrowers in the Philadelphia area.

The Federal Deposit Insurance Corp. acknowledges in a new report that it didn’t adequately monitor First Republic Bank’s uninsured deposits, interest rate risk sensitivity and rapid growth — and as a result left the bank vulnerable to contagion.

Tata Consultancy Services’ clients will have direct access to the fintech company’s risk-mitigating ecosystem to keep their data, bank account verifications and transactions safe.

Uneventful Friday. Thoughts Turning to CPI

Apart from the fact that 10yr Treasury yields are about 25bps higher than they were before last Friday’s jobs report, it was an uneventful week for the bond market with only one or two exceptions.  The first exception was the exceptionally large amount of corporate bonds that hit the market in the first half of the week.  The result was fairly constant upward pressure in rates for no other apparent reason.  The 2nd was Wednesday’s ISM Services data which added to the upward pressure.  Thursday marked a technical correction/recovery and Friday ended up being entirely superfluous.  Thoughts are already turning to next week’s CPI which occurs one week before a fairly important Fed meeting.  Volatility potential would be high anyway, but doubly so in this case as the Fed is in the blackout period ahead of its meeting, thus allowing the market’s imagination to run wilder than normal.

Econ Data / Events

Wholesale Inventories

-0.2 vs -0.1 f’cast, -0.7 prev

Market Movement Recap

09:33 AM Stronger right at the start of the overnight session, weaker in Europe, but bouncing back early.  10yr down 1.8bps at 4.232.  MBS up 3 ticks (.09).

12:03 PM steady weakness since 10am.  MBS now unchanged and 10yr up 0.2bps at 4.25%.

02:28 PM Slightly weaker into the PM hours, but bouncing now.  MBS up 1 tick (0.03) and 10yr back down to 4.25% after rising to 4.264%

04:00 PM Very flat in the PM hours.  MBS down 1 tick (0.03) and 10yr yields up 0.6bps at 4.256.

There weren’t any huge, obvious market movers in the overnight session.  The average analyst is chalking up bond gains to good old “global growth concerns”  due to weak data in China/Japan and a few other headlines (i.e. business bankruptcies getting more attention). 
First off, there really wasn’t much movement overnight or this morning.  If forced to comment on the modest swings, it might make more sense to focus on context clues that suggest traders were reacting to a few Fed speeches after yesterday’s close. 
Both Goolsbee and Logan shared similar thoughts on the topic of the Fed rate hike cycle now shifting to “rate hold” cycle.  The only real context clue regarding the market’s interpretation was the simultaneous gains in both stocks and bonds right as the start of overnight trading (the comments came out during fully-closed hours).  Since then, we’ve seen a bit more of the same “mirror image” pattern that goes hand in hand with the trading of Fed expectations.  All in all though, things have been uneventful with minimal movement and volume in the bigger picture. 

Inflation and price increases can be widespread and impact many, like gasoline or flour, or can be very specific and impact only a small portion of the population, like guitar strings or limoncello. Continued rent increases impact many, not the least of which are the roughly 50 million tenants themselves along with their potential loan originators who could help them finance a house. Word has it that owners stay in their homes 13 years, although this source says 16 years, whereas tenants stay in their rental about 3 years for a house and 2.5 years for multi-family/apartments. There is a lot of hope being placed by lenders in tenants who move into ownership, as volume stinks. According to Curinos, August 2023 funded mortgage volume decreased 26 percent YoY and increased 8 percent MoM. In the Retail channel, funded volume was down 31 percent YoY and up 8 percent MoM. The average 30-year conforming retail funded rate in August was 6.82 percent, 13bps higher than July and 124bps higher than the same month last year. Curinos drills into this data further here. (Today’s podcast can be found here and this week’s is sponsored by LoanCare, a Fidelity National Financial (NYSE: FNF) division and award-winning developer of the most sophisticated mortgage servicing portfolio management tool, LoanCare Analytics, built to support MSR investors with a focus on customer engagement, liquidity, and credit risk. Hear an interview with LoanCare’s Kevin Cooke on servicing technology advances and differentiators.)

Despite rate hikes, most still profit by an average of 3% but local exceptions may continue to increase.

Even though the average for the 30-year fixed loan declined for the second straight week, a buoyant economy will affect future movements, Freddie Mac said.

Fraudsters are leveraging advanced artificial intelligence to impersonate customers and deceive financial institutions, but the industry is fighting back with detection systems.