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Mortgage applications continued to ride the waves from last week’s dip in rates, extending the surge that followed early-January rate volatility. The Mortgage Bankers Association (MBA) reported that applications rose 14.1% for the week ending January 16, adding to the prior week’s sharp increase. Refinance demand again led the way. The Refinance Index climbed 20% from the previous week and was 183% higher than the same week one year ago, marking the strongest weekly pace since September. The magnitude of the increase underscores the widely publicized (but oh so temporary) news that intraday 30yr fixed rates dipped just below 6% for the first time in years. “Mortgage rates declined further last week, driving another big week for refinance applications,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “These movements prompted greater refinance activity from conventional and VA borrowers, with refinance applications accounting for more than 60 percent of total volume.” The rate rally was swift enough to spill over to purchase demand–a tall order in the world of mortgage apps. The Purchase Index rose 5% week-over-week, while unadjusted purchase applications increased 12% and were 18% higher than the same week one year ago. The refinance share of total applications increased to 61.9% from 60.2% the prior week. ARM share edged up to 7.1% . FHA share fell to 15.9% from 19.2%, while VA share increased slightly to 16.2%. USDA share was unchanged at 0.4%.

Observers said the Supreme Court likely will allow Federal Reserve Gov. Lisa Cook to remain at her post while she challenges her purported removal by President Donald Trump. But her continued presence would slow, rather than stop, the president’s quest for a voting majority on the central bank board.

Tri-merge mandates prop up a credit bureau/FICO oligopoly, raising mortgage costs with little benefit despite risk concerns, the chairman of Whalen Global Advisors argues.

Pfotenhauer held many positions in the mortgage and title industries in his long career, including being the chair of Merscorp, MORPAC and MISMO.

The 30-year fixed rate mortgage increased 3 basis points this past week, off of a three-year low point, but are nearly a percentage point lower than a year ago.

Mortgage borrowers filed a third amended class action complaint against the bank over modification issues from 2010 to 2015.

Bonds Erase Most of The Overnight Weakness

Thursday could be viewed two ways. On one hand, bonds lost ground early and were unable to recover it by the 3pm close. On the other hand, there was a decent rally on Wednesday that set a high bar for additional gains.  In other words, it’s a victory to merely hold close to yesterday’s closing levels. Data passed without a trace, either because it was stale, near consensus, or both. There was better buying in the afternoon–a fact that’s consistent with our observation that the EU session had an impact today.  The afternoon bond market recovery commenced when EU markets closed. Correlation, yes, but not necessarily causality. 

Econ Data / Events

Continued Claims (Jan)/10

1,849K vs — f’cast, 1884K prev

Core PCE Prices QoQQ3

2.90% vs 2.9% f’cast, 2.6% prev

Corporate profitsQ3

4.7% vs 4.4% f’cast, 0.2% prev

GDPQ3

4.4% vs 4.3% f’cast, 3.8% prev

GDP Final SalesQ3

4.5% vs 4.6% f’cast, 7.5% prev

Jobless Claims (Jan)/17

200K vs 212K f’cast, 198K prev

PCE Prices (Q/Q)Q3

2.8% vs 2.8% f’cast, 2.1% prev

Core PCE (m/m) (Nov)

0.2% vs 0.2% f’cast, 0.2% prev

Core PCE (y/y) (Nov)

2.8% vs 2.8% f’cast, 2.7% prev

PCE (y/y) (Nov)

2.8% vs 2.8% f’cast, 2.7% prev

PCE prices (m/m) (Nov)

0.2% vs 0.2% f’cast, 0.2% prev

Market Movement Recap

08:34 AM Modestly weaker overnight and no reaction to AM data so far. MBS down an eighth and 10yr up 1.7bps at 4.258

10:30 AM No major reaction to PCE data. MBS still down an eighth and 10yr up 2bps at 4.261

12:37 PM Bouncing back a bit. MBS down only 2 ticks (.06) and 10yr up only 1.3bps at 4.254

03:22 PM MBS down 3 ticks (.09) and 10yr up 0.8bps at 4.249

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Mortgage rates may not be as low as they were before the weekend’s geopolitical headlines, but they’ve moved just a hair lower on each of the past two days. Specifically, our daily rate index is down to 6.19% after starting the week at 6.21% on Tuesday (up from 6.07% last Friday). While there was a large glut of seemingly important economic data today, it didn’t have a noticeable impact on the bond market. Part of the reason is that the data in question is very stale at this point.  The most recent monthly data covered November and the GDP release was for Q3 (July-Sep). Timeliness aside, the data was also very close to forecasts. There’s even less on the calendar tomorrow, but markets remain susceptible to geopolitical risk and any headlines that speak to the fiscal outlook (tariffs, spending, etc).