Bonds are under pressure yet again at the start of the new week–insult added to injury coming off of the worst week of selling since the late October Fed announcement. On that note, some of the recent weakness could be the bond market’s way of bracing for another unfriendly impact from the Fed. There’s also the need to make room for Treasury auctions during a less liquid time of year as well as a relatively important JOLTS release on Tuesday morning. Either way, 10yr yields are stretching the upper boundary of the medium term range.

“Blimps are one of the only forms of advertisement people are actually excited to see.” “Rob, we see all kinds of companies advertising at conferences. We are trying to lower our cost per loan, and I am doing a more formal review of third-party providers. I am wondering if there is a list of vendors who focus on certain areas out there?” Yup: a very good place to start is The Marketplace. Page down to look at the categories. (If your company isn’t on there yet, contact Jake Perkins.) Advertising is a piece of marketing, and on today’s Now Next Later (at 1PM ET) Jeremy Potter and Bri Lees, advisor to mortgage leaders, take a deep dive into the state of marketing and sales in mortgage and explore the differences between B2B and B2C strategies, where the industry is succeeding, where it needs to pivot, and the innovative marketing approaches mortgage has yet to tap into. Some will say that there are still too many lenders, too many LOs, and too many vendors. “If you get the deal, it will be with low margins.” (Today’s podcast can be found here and this week’s are sponsored by Lenders One. Lenders One is dedicated to helping independent mortgage bankers, banks and credit unions reduce costs, improve profitability, and operate competitively in the mortgage industry and within their communities. Hear an interview with C2 Financial’s David Temko on the upcoming National Home Affordability Counseling Day, where mortgage brokers across America will give free one-on-one credit counseling to create a path to homeownership.)

Both stocks and bonds lost ground on Monday. This pushed mortgage rates up near their highest levels in just over 3 months (because mortgages are based on bond prices).  To put the 3-month highs in perspective, today’s rates are right in line with those seen 2 weeks ago. [thirtyyearmortgagerates] When we see a larger-than-average shift in rates, it’s often attributable to an obvious catalyst. These can be things like economic reports, comments from the Fed, or geopolitical developments.  In today’s case, there are no obvious scapegoats. That said, given the proximity of the next Fed announcement, “pre-Fed jitters” will likely be a popular guess.  Ultimately, between Thanksgiving and New Years, we’re simply more likely to see random volatility without a clear root cause. Clear connections will be more likely over the next 2 days due to Tuesday’s economic data and Wednesday’s Fed announcement. 

Manufactured housing could see eased lending rules if the defense bill removes the “permanent chassis” requirement, expanding FHA mortgage eligibility.

BTIG is waiting with “baited breath” for Fannie Mae and Freddie Mac to relist their common stocks, but if spreads widen, it could derail it from happening.

US consumer spending stalled in September, suggesting Americans were already stretched going into the government shutdown in the face of stubborn inflation.

A recent Remax survey found 88% of respondents said they are “very” or “somewhat likely” to purchase a home next year.

Federal Housing Finance Agency Director Bill Pulte should be called to testify before lawmakers no later than the end of January, the Democratic members of the Senate Banking Committee wrote in a letter Friday to Republican Chairman Tim Scott.

Technicals Help Reconcile Selling Pressure

In the realm of market commentary, technicals are a vastly overused explanation for past movement, let alone for the prediction of future movement. In this week’s case, however, the consolidation pattern in bond yields offers one of the only ways to understand the otherwise inexplicable selling pressure. Long story short, the weakness was just the right size and pace to complete the pattern heading into events with more power to inspire definitive reactions and lasting momentum.

Econ Data / Events

Consumer Sentiment (Dec)

53.3 vs 52 f’cast, 51.0 prev

Sentiment: 1y Inflation (Dec)

4.1% vs — f’cast, 4.5% prev

Sentiment: 5y Inflation (Dec)

3.2% vs — f’cast, 3.4% prev

U Mich conditions (Dec)

50.7 vs 51.3 f’cast, 51.1 prev

Core PCE (m/m) (Sep)

0.2% vs 0.2% f’cast, 0.2% prev

Core PCE Inflation (y/y) (Sep)

2.8% vs 2.9% f’cast, 2.9% prev

Inflation-Adjusted Spending (Consumption) (Sep)

0.3% vs 0.3% f’cast, 0.6% prev

Personal Income (Sep)

0.4% vs 0.3% f’cast, 0.4% prev

Market Movement Recap

09:29 AM Modestly weaker overnight but recovering a bit.  MBS down 1 tick (.03) and 10yr up 1.2bps at 4.11

10:59 AM 10yr yields are up 3bps at 4.128. MBS are down only 3 ticks (.09) on the day.

12:20 PM MBS down an eighth and 10yr up 3.1bps at 4.129

Recently I paid over $10 for a simple Oscar Mayer 12-ounce package of bacon. Jerome Powell, help me! Well, the U.S. Federal Reserve doesn’t set bacon prices, or things that come from China like rare earth metals, most of which I’ve never heard of but are apparently in my phone and car’s dashboard. Geopolitical tensions and export restrictions in China sending the prices of crucial metal components in electronics way up. The price of dysprosium is up to $910 per kilogram, triple the pre-export restrictions price. The price of terbium hit $3,700 per kilogram, quadruple the previous rate. The benchmark price for gallium has reached $1,325 per kilogram, which is 2.3 times the price at the beginning of the year and the highest price on record. China produces 99 percent of the world’s gallium. Our Federal Reserve can only do so much when it comes to combatting inflation. (Today’s podcast can be found here and this week’s are sponsored by Two Dots, whose conversational screening agent replaces manual underwriting with a streamlined, end-to-end process that reduces risk and fraud while securing safer borrowers, increasing profitable loan volume, and lowering underwriting overhead. Today’s has an interview with Creative Title’s Caleb Christopher on how lenders can adopt advanced AI and creative financing models while maintaining transparency, security, and consumer protection, and examining how private-capital “non-bank bank” structures, tightening credit, and the needs of underserved borrowers will shape the balance between innovation, risk, and trust.)