A home insurer that the industry services provider owns has exposure to the Vesttoo platform, an AI-driven cap markets fintech facing claims of falsified collateral.

Mortgage rates are noticeably higher to start the new week for most lenders although some lenders increased their costs nearly as much on Friday.  Between the two business days (banks were closed on Monday), the average lender is up between 0.125% and 0.25% from Thursday afternoon.  Rates are sometimes pushed higher by big, obvious events and economic reports.  Other times, the motivations are more subtle, elusive, and even non-existent.  Today’s motivations were definitely not obvious at first glance.  Even now, it’s sort of like finding forensic evidence to piece together a mysterious crime.  We have a few good leads, but nothing conclusive and satisfying. The best leads have to do with arcane bond market happenings such as corporate bond issuance (big corporations issuing bonds which sap some of the buying demand from other bonds, thus pushing rates higher across the board) among other things.  Tomorrow should be different as there is important economic data due out at 10am ET.  

Issuance and Holiday Hangover Hitting Bonds

Bonds were decently weaker on the first day back after Labor Day weekend.  Futures and overseas markets were not on holiday and they spent Monday building in some of the weakness seen today’s opening levels.  In fact, from those opening levels, today’s selling was fairly minimal, or at least fairly gradual.  One of the only obvious measurable culprits was a glut of corporate bond issuance.  This is always a consideration in the background, but it tends to push yields higher when issuance is larger than expected.  The long weekend served to concentrate the dose.

Econ Data / Events

Factory Orders

-2.1 vs -2.5 f’cast, +2.3 prev

Market Movement Recap

09:23 AM Weaker overnight, slightly recovery after Fed’s Waller, but settlings at opening levels again. 10yr up 5bps at 4.23 and MBS down just over a quarter point.

11:09 AM slightly weaker into 10am hour, but stabilizing now.  10s up 6.6bps at 4.247 and MBS down roughly a quarter point.

02:13 PM Weakest levels of the day with MBS down more than 3/8ths and 10yr yields up 8.5bps at 4.266.

04:33 PM Heading out near weakest levels with MBS down roughly half a point and 10s up 8.7bps at 4.268.

It was a rough weekend. My cat Myrtle, resting comfortably at the top of the food chain, was visibly miffed at me not nominating her (again) for the vaulted “40 under 40” award. I reminded her that she is way over that in cat years, but my explanation fell on her one deaf ear and her one good ear despite me telling her how much line-caught salmon we could buy with the nomination fee. (Hey, don’t get me wrong. I know some of those folks who were nominated or selected, and the industry is better off because of them!) If lenders would like a little good news, they should know that, despite the low interest rates we saw a few years ago, people are still moving, and that’s a source of business. Around 8.6 percent of Americans moved last year, slightly more than the previous year, but still below pre-pandemic levels. Accordingly, WalletHub released its report on 2023’s Best States to Live in. Chalk it up to complete East Coast bias, but Massachusetts, New Jersey, New Hampshire, and New York took the top four spots. Really? (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 Flagstar’s Jason Lee on how capital markets departments balance volume and margin.) Lender and Broker Products, Programs, and Services

After a frustrating selling spree last Friday, bonds are starting the new week with a bit more selling.  Much like Friday, justifications are not as satisfying and obvious as many market watchers may hope.  That said, things are a bit more reasonable given the fact that today’s weakness isn’t as pronounced during domestic hours.  The overnight session was more of a gradual affair judging by the linear downtrend in Treasury futures prices. 

As for bad actors, we’ve seen quite a lot of blame placed on oil prices, but continue to take that with a grain of salt.  There are two many instances like the one highlighted in the chart below to give oil credit for very much short term momentum in bonds.

Better candidates might include today’s sharply elevated corporate bond issuance or a few various Fed speakers creating short-end volatility.

After remaining above $2 trillion for a year, the Federal Reserve’s overnight reverse repurchase facility has seen steadily less use in recent months. The development is welcomed by banks, but could be a sign that certain financial players are shifting funds to riskier activities.

The top three cities have an average payback period of just over 21 months on a 20% down payment.

The U.S. The Treasury Department’s program allows lenders to employ more flexible underwriting to serve more underserved borrowers.

A group publicly identified as Bidder J, that reportedly includes big names in finance, is willing to pay $1.61 per share above the $11.15 Rithm Capital agreed to.

The provider of home-equity loan products will partner with Cerberus Residential Opportunities, an affiliate of the capital management firm, with CEO Jerry Schiano at the helm.