After falling for 5 straight days leading into Tuesday, mortgage rates have now moved slightly higher on each of the past two days. As was the case with the improvement, the bounce back has been exceedingly modest in its pace. In fact, most borrowers will be seeing the same rates today vs last week with only minor changes in upfront costs. Today was the only day of the present week with any meaningful economic data. This is relevant because rates are based on bonds and economic data is a key source of motivation for bond movement, but it depends on the data in question.  For instance, next week’s big jobs report on Friday is guaranteed to result in some of the highest-volume bond market trading of the month.  It also has a higher chance than any other scheduled report to cause a big move in one direction or the other.  Contrast that to this week’s economic calendar and it’s a completely different story.  Even if we added every scheduled event together, it still wouldn’t surpass next week’s jobs report in terms of potential rate impact. This morning’s Jobless Claims report (NOT the same as next week’s much more important jobs report) was the first time this week that bonds even visibly reacted to data.   Jobless Claims were lower than expected. A stronger labor market tends to coincide with higher rates, all else equal. In today’s case, it made for a slight bump, but no major drama. After bottoming out on July 1st and bouncing higher through July 8th, rates have generally been sideways.   [thirtyyearmortgagerates]

Reasonably Resilient After Data-Driven Selling

This morning’s Jobless Claims report was the week’s most relevant economic report apart from the S&P PMI data that came out just over an hour later.  As it happened, Claims garnered the only obvious response, pushing yields slightly higher in addition to the modest weakness seen in the overnight session. Bonds were able to push back in a friendlier direction at the 9:30am NYSE open–something they’ve done on 3 out of 4 days this week.  It wasn’t quite enough to turn a red day green, but with MBS ending down only 2 ticks (.06), some might say it was close enough for government work.

Econ Data / Events

Jobless Claims

217k vs 227k f’cast, 221k prev

Continued Claims

1955k vs 1960k f’cast, 1951k prev

S&P Manufacturing PMI

49.5 vs 52.6 f’cast, 52.0 prev

S&P Services PMI

55.2 vs 53.0 f’cast, 52.9 prev

New Home Sales

627k vs 650k f’cast, 623k prev

Market Movement Recap

09:16 AM Some selling before and after jobless claims.  MBS down 7 ticks (.23) and 10yr up 5.3bps at 4.438

10:09 AM decent recovery at 9:30am NYSE open and no major reaction to S&P PMI data.  MBS down an eighth and 10yr up 2.7bps at 4.411

01:01 PM MBS down only 2 ticks (.06) and 10yr up 1.9bps at 4.403

03:39 PM Fading a bit now.  MBS down 5 ticks (.16) and 10yr up 3.3bps at 4.417

Jobless claims data continues to defy a majority of other labor market metrics in showing a remarkable lack of any signs of softening.  In fact, the 4 week average is now at a 13 week low.  While this isn’t the most highly consequential econ data, it’s one of this week’s only actionable reports. As such, bonds are undergoing a small but negative reaction, adding to moderate overnight weakness.

The end of VA foreclosure moratorium is behind a rise in auctions, but bidder hesitancy suggests home prices could fall further.

Rocket Companies confirmed it had reduced its workforce following the completion of its Redfin merger. The company also plans to discontinue Rocket Card on Sept. 8.

Plaintiffs, who are all U.S. citizens of Indian origin, accuse the company of making the fraud accusations to cover up the unlawful termination.

The Department of Justice has filed a notice that it will appeal a D.C. District Court ruling that reinstated two democratic members of the National Credit Union Administration who had been fired by President Trump earlier this year.

The agreement with D2 Asset Management doubles the firm’s previous commitment to Unlock, as current economic trends provide momentum for the growing sector.

Broadly Calm Despite Modest Pull-Back

If anything about the present week required investigation and explanation, it was the justification for fairly decent gains right out of the gate. Today’s weakness, by comparison, is more logical. Why? Broader momentum is sideways and volatility should be lower this week vs last. A bit of of a pull-back on Wednesday means bonds are doing a good job of keeping things sideways.  For those determined to assign blame, we could perhaps turn to the US/Japan trade deal progress that apparently helped stocks and hurt bonds in the overnight session. At the very least, we know markets are somewhat tuned in to such developments based on mid-day newswires regarding a potential EU trade deal that briefly hit bonds and helped stocks. 

Market Movement Recap

08:47 AM steadily weaker overnight on trade deal announcements.  MBS down 3 ticks (.09) and 10yr up 2.4bps at 4.37

11:49 AM Sideways to slightly weaker.  MBS down an eighth and 10yr up 3.1bps at 4.344

12:18 PM Weakest levels after trade headlines, but stabilizing now.  MBS down an eighth and 10yr up 4.3bps at 4.389

04:31 PM Heading out without much change. MBS down an eighth and 10yr up 3.5bps at 4.381

The analytical theme this week has been to observe the market movement and then go scrambling for justification.  Such is the nature of a week without any actionable econ data. This morning’s example involves yesterday evening’s announcement of a trade deal with Japan which can generally be credited with boosting stocks and hurting bonds in the overnight session.  There’s been just a bit more selling as domestic trading ramps up for the day, but not enough to break above this week’s high yields.