Two-Way Trading But Not Much Day-Over-Day Movement

Bonds had a solid morning, adding moderately to yesterday’s rally and taking yields well into the lowest levels since last Friday. But from just after the 9:30am NYSE open, bonds leaked slowly weaker, ultimately ending the day closer to unchanged levels. In the bigger picture, nothing interesting or significant happened, and December 16th (jobs report day) is set to be the only other obviously tradeable day of 2025.

Econ Data / Events

Jobless Claims

236k vs 220k f’cast

Continued Claims

1838k vs 1950k f’cast

Market Movement Recap

10:23 AM Stronger after claims data. MBS up 6 ticks (.19) and 10yr down 3.6bps at 4.115

12:44 PM MBS up an eighth and 10yr down 2.7bps at 4.123

02:30 PM Gains fading a bit. MBS up only 2 ticks (.06) and 10yr down 1.1bps at 4.14

03:57 PM drifting out at same levels as last update.  MBS up 2 ticks (.06) and 10yr down 0.9 bps at 4.142

Bonds are adding moderate to yesterday’s post-Fed gains. Most of today’s rally has followed this morning’s jobless claims data, but we wouldn’t necessarily give it all the credit. This is a tricky week to try to make sense of jobless claims due to the very late Thanksgiving holiday this year. It threw a wrench in seasonal calculations. In a nutshell, last week’s initial claims plummeted due to Thanksgiving and seasonal adjustments didn’t help much because, on average, Thanksgiving falls on the 25th (thus, last week’s claims were too late in the month to get much benefit from the adjustment).  Continued claims magnify the same issue with this week’s data (continued claims run 1 week behind initial claims). This is why we have the biggest jump in years in both metrics with one being higher and the other being lower. It’s all about seasonal adjustments.  If we do our best to look through that, non-adjusted continued claims are the highest in years, and bonds could be paying some attention to that.
This seasonally adjusted chart shows the snap back to reality for initial claims.  It would have been a smaller jump if last week wasn’t distorted on the low side. 

Opposite problem for continued claims, which are reported 1 week later (i.e. you can bank on a big snap back next week):

The following chart shows NON-seasonally adjusted continued claims.  With this chart, it’s easy to see 2025 running at the highest levels in years. Bonus point for those who see the gray line poking briefly higher only to realize Thanksgiving was on the 11/23 in 2023.

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With the Federal Reserve decision largely factored in, Jerome Powell’s comments on future outlook is more likely to influence the housing market.

November rate locks fell seasonally but hit their strongest level since 2021, led by refis, while lenders shifted more loans to the GSE cash window.

Home equity is becoming a data-driven asset that demands sharper valuation and analytics as lending options expand, according to Clear Capital’s EVP of Strategy and Growth.

Hartford, Connecticut, Rochester, New York, and Worcester, Massachusetts, headed the list of the 100 largest metro areas in the country, according to Realtor.com.

Sen. Hassan sent letters to corporate owners of manufactured housing communities, looking for answers on affordability and living conditions for their residents.

Seasonally adjusted mortgage application activity rose 4.8% last week, according to MBA’s Weekly Mortgage Applications Survey for the week ending December 5. Unadjusted applications jumped 49% from the prior week, reflecting a rebound following the Thanksgiving-related slowdown. The Refinance Index surged 14% from the previous week and remains 88% higher than the same week one year ago—another strong year-over-year showing as borrowers respond to modest rate improvement, particularly in FHA products. Purchase activity was softer on a seasonally adjusted basis, slipping 2% from the prior week. Unadjusted purchase applications increased 32% week-over-week due to the holiday comparison and are running 19% above last year’s pace, supported by gradually improving affordability and inventory conditions. “Compared to the prior week’s data, which included an adjustment for the Thanksgiving holiday, mortgage application activity increased last week, driven by an uptick in refinance applications,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “Conventional refinance applications were up almost 8 percent and government refinances were up 24 percent as the FHA rate dipped to its lowest level since September 2024. Conventional purchase applications were down for the week, but there was a 5 percent increase in FHA purchase applications as prospective homebuyers continue to seek lower downpayment loans. Overall purchase applications continued to run ahead of 2024’s pace as broader housing inventory and affordability conditions improve gradually.”

The Fed cut its policy rate by 0.25% today and mortgage rates moved lower after the announcement. That said, those two developments are not related. In fact, there was no movement in the bonds that underlie mortgage rates when the rate cut was announced. Instead, the market (and rates) moved in response to Fed Chair Powell’s press conference. While there is a mistaken belief that such press conferences “always” result in upward pressure on rates, today shows they can go both ways. Key comments that may have helped: Powell: Job gains could have been overstated in recent months Powell: Growing evidence that inflation is coming down Powell: Rates are now in a high range of neutral The reference to “neutral” means the Fed Funds Rate is near the levels that should neither help nor hurt the economy. Being in the higher end of that range means there could be room for another rate cut or two in 2026. This possibility was already reflected in the rate forecasts that came out with today’s announcement, but the market appreciated hearing it from Powell. Up until Powell’s press conference, mortgage rates had been little changed from yesterday. Afterward, most lenders made mid-day changes resulting in the lowest rates of the week.