Last week’s overseas headlines raised questions about about a spillover from volatility in the Japanese bond market to US yields. At issue: attention-grabbing newswires regarding a surge in long-term Japanese yields. Now today, overnight headlines made for a decisive correction in Japanese yields–one that’s being credited for opening strength in Treasuries. Is it warranted?  Maybe… Whether it is or isn’t, the movement in Treasuries is insignificant  by comparison. Yields continue operating in the same range, although they are now arguably exiting the prevailing uptrend of the past few weeks.

As for the Japan effect, here’s the case being made for today:

That looks pretty compelling, but if we zoom out, we can see the much larger movements in JGBs (Japanese government bonds) having absolutely zero correlation with Treasuries. 

Bottom line: we’d take the Japan effect with a grain of salt–especially on a holiday-shortened week.

The 30yr fixed mortgage rate index spent 3 consecutive days over 7% last week–the first time that’s happened since February.  Rates have generally been in a more volatile, more elevated range for the past 7 weeks compared to the narrow range seen in March. To put that in perspective, the difference between these two ranges is only 0.125%–not the biggest deal. Another perspective is that any given mortgage borrower may have seen their rate quote jump by 0.50% if they had unlucky timing.  Today’s improvement was partially driven by overnight bond market movement with investors reversing some of the defensive trades seen last Friday.  Later in the morning, the Consumer Confidence Index was stronger than expected, but one of its components raised concern over the labor market. Weaker labor conditions tend to push rates lower, all else equal. The underlying bond market improved after that and several mortgage lenders issued revised rates in response.

This potential transaction would be part of a broader trend of mortgage lenders and servicing players converging, such as Rocket’s recent acquisition of Mr. Cooper.

By restructuring the GSEs into public utilities, we can end decades of free-riding by private investors on the public credit, writes the chairman of Whalen Global Advisors.

Federal Reserve Gov. Lisa Cook said in a speech Friday that the market’s response to recent volatility shows resilience, but more study is needed about the financial stability implications of business relationships between banks and nonbanks.

The top female loan originator in the mortgage industry logged $186.5 million in dollar volume over the course of 2024.

The top five lenders had an average mortgage origination volume of more than $43 billion at the end of Q1.

Rapidly rising tuition and housing costs both contributed to lower homeownership rates and a more than twofold surge in student debt in under 15 years.

Purchases of new single-family homes increased 11% last month to a 743,000 annual rate, the highest level since February 2022, according to government data.

The Census Bureau reported New Home Sales for April today, and at face value, the news is good.  Economists expected an annual pace of 692k, but were instead treated to a surprisingly high 743k–just edging out 3 of the best months over the past 3 years. Unlike many of the other reports we cover, there’s really no glaring counterpoint when we zoom out to a wider frame of reference.  Sure, sales were higher during the post-pandemic housing frenzy, but unlike existing homes and other housing data, New Home Sales are as good or better than their pre-pandemic levels.  So what’s the catch? It’s too soon to say.  In some sense, today’s results are cheapened by the fact that last month’s numbers were revised quite a bit lower.  Granted, big revisions are not-at-all uncommon for this data series, but if we’re going to award titles like “best levels in 3 years,” it’s worth noting that this will not be the case if we see even a fraction of the same sort of downward revision next month. Geographically, the surprising surge was led by the South and Midwest.  The Western region held mostly steady and the Northeast lost ground. 

Northeast

23k (down 4k from March)

Midwest

84k (up 22k from March)

South

478k (up 50k from March)

West

158k (up 5k from March)