Renovations, already the leading use for these borrowings, increased their share to nearly two-thirds of the products’ market, the Mortgage Bankers Association said.

The Mortgage Cadence’s pipeline of potential customers has shifted from “niche players” to primarily nonbank lenders, Executive Vice President Joe Camerieri said.

As we discussed yesterday, it was entirely possible that today would bring a rate hike from the Fed that coincided with mortgage rates moving LOWER.  This can be confusing due to the mistaken belief that the Fed Funds Rate has an immediate and direct effect on the mortgage market. The Fed Funds Rate is a target that pertains to overnight lending between the biggest banks.  The rest of the interest rate  world radiates outward from there with different levels for different time frames.  A mortgage tends to last 5-10 years, and the outlook over that time frame can often differ substantially from the outlook over the next 24 hours. More importantly, the market is free to trade based on its expectations for Fed rate hikes.  If the Fed is seen hiking with 100% certainty (as was the case today), other interest rates have already adjusted and the Fed Funds Rate itself will be the last thing to change.  Indeed, Fed Funds Futures (the financial contracts which allow markets to bet on Fed Funds Rate levels) had today’s hike almost fully priced in by the end of May and those expectations didn’t change much at all since then. (note: the big drop in March coincided with the Silicon Valley Bank failure and the onset of the mini banking crisis) All of the above means the bond market was free to react to the content of Fed Chair Powell’s press conference as opposed to the rate hike itself.  The reaction wasn’t huge, by any means, but it was rate-friendly in today’s case with the average lender falling back below 7% for a top tier conventional 30yr fixed. 

Needle Threaded. Data Dependence Continues

In today’s post-rate-hike press conference, Fed Chair Powell managed to hit on all of his consistent talking points (data dependent, job not done on inflation, future rate hikes not predetermined) AND introduce a few newer thoughts (policy now considered “restrictive,” 2% inflation not foreseen until 2025 or so) all without leaving the market with a clear cue to buy or sell.  Granted, there was some buying, but not much, and arguably only to defuse the defensive trades seen over the past 2 days.  This is a prime example of threading the needle.  He acknowledged developments, respected the static talking points, and left all the relevant decision making for the broader committee in the future (and even then, only with the benefit of additional economic data between now and the next meeting).

Market Movement Recap

09:45 AM essentially flat overnight. gains at the 8:20am CME open and now bouncing a bit. 10yr down 0.7bps at 3.883.  MBS up 1 tick (0.03).

01:52 PM All quiet ahead of Fed.  MBS up 2 ticks (.06) and 10yr up .4bps at 3.894

02:04 PM Slightly stronger after Fed.  10yr down 0.7bps at 3.883.  MBS up 1 tick (0.03)

03:05 PM  Additional gains during press conference.  10yr down 3.3bps at 3.857.  MBS up a quarter point

Post-merger Banc of California will target “in-market relationship banking” by focusing on treasury management services and loan growth to boost “low-cost” commercial deposits, CEO Jared Wolff said.

Compared with other tax lien transactions, PVOne 2023-1 has a much smaller initial redemption value, and has one of the lowest numbers of liens, at 9,681. Its weighted average loan-to-value (LTV) ratio is 8.8%.

Federal Deposit Insurance Corp. sales from the portfolios of failed Silicon Valley Bank and Signature could be complete by September, according to a report published Tuesday by FHN Financial.

A New Jersey federal jury sided with the subservicer’s claims that the lender “fraudulently” took this sum in May 2016 when it was transferring back its portfolio.

In the Pacific region and Mountain states recorded real estate value drops compared to last year, the Federal Housing Finance Agency found.

Just a Bit More Pre-Fed Positioning

It ended up being a fairly uneventful day for the bond market despite starting off on a somewhat rocky note.  MBS suffered from illiquidity in the first 2 hours of the trading day and 10yr yields pushed highs of 3.92 on two occasions before dropping below 3.90 after the 3pm close.  Traders were squaring positions ahead of tomorrow’s Fed announcement and also building in concessions for the Treasury auction cycle.  

Econ Data / Events

Consumer Confidence

117 vs 111.8 f’cast

Market Movement Recap

09:44 AM Weaker overnight but finding footing.  10yr up 1.4bps at MBS down 3 ticks (.09).

10:14 AM A bit more weakness after Confidence data.  MBS down 5 ticks (.16) and 10yr up 2.2bps at 3.9

02:47 PM MBS staying sideways with 5.5 coupons down an eighth.  Treasuries underperforming with 10yr yields up 3.4bps at 3.912.

04:26 PM Mini recovery in Treasuries with 10yr now up only 1.2bps on the day at 3.89.  MBS are down 2 ticks.