Recall 2 weeks ago that news of the incoming German Chancellor’s ambitions to massively increase debt/spending led to the end of the bond rally in the US that took 10yr yields from 4.55 to 4.15%. The resulting bounce in US Treasuries was limited to roughly 15bps.  Meanwhile, Germany’s equivalent 10yr yields spiked 3 times as much, with the March 5th being the worst day for German bonds since 1989 (fall of Berlin Wall). At the time, it wasn’t a given that the debt ceiling increase could pass muster in Germany’s constitutional court and parliament, but as of this morning, it’s a done deal. Thankfully, it seems markets already had this fully priced in.

Meanwhile, the US bond market’s consolidation continues in stunningly perfect fashion ahead of tomorrow’s Fed dot plot.

If you ask a technical analyst, the chart above is a classic consolidation (or triangle, pennant), and it carries one of several connotations. Some say they’re predictive, but the only reliable prediction is that such consolidations can’t last forever (after all, the white lines are about to converge). The Fed’s dot plot probably has the power to cause a breakout in one direction or the other, but incoming economic data would have to agree with the move if it’s to be sustained. 

The calendar pages flip. We’re in mortgage conference season again in hotels around the nation, and why not have a little fun leaving your quarters (especially when the hotel room is registered under someone else’s name, cuz you probably won’t be welcomed back)? Yes, time flies. It’s been two years since Silicon Valley Bank declared bankruptcy, leading plenty of pundits to suggest the U.S. banking system was going to crumble. Of course, they were wrong, and our banking system did not crumble because of it, which is certainly a good thing. But in terms of crumbling, remember when Florida’s Surfside Condos collapsed four years ago? In condo selling and financing news, the talk is about “the blacklist maintained by Fannie Mae and includes condo associations that the mortgage finance giant thinks don’t have adequate property insurance or need to make critical building repairs… According to lenders and real-estate agents, Fannie Mae greatly expanded the list after the condo collapse killed 98 people. Compounding the problem, a nationwide insurance crisis is making it more expensive for condo associations to afford adequate coverage.” (Today’s podcast can be found here and this week’s is sponsored by CoreLogic. Whether it’s using cash to purchase a home, debt consolidation, or a straight cash-out refinance, CoreLogic’s Precision Marketing’s data-driven insights pinpoint your best opportunities to retain and recapture your clients. Today’s has an interview with Experian’s Ken Tromer and Ted Wentzel on why price transparency is important in the verification process, and how Experian Verify ensures it.)

Large mortgage companies are targeting mergers and acquisitions as well as home equity lending in their 2025 business plans, Boston Consulting Group said.

Measures of current sales of single-family homes and prospective-buyer traffic, dropped to their lowest levels since the end of 2023.

Rocket said the Redfin deal is part of a purchase mortgage strategy, but originating and retaining residential mortgages in portfolio is the real endgame writes the chairman of Whalen Global Advisors.

An ex-Biden administration official suggested potential challenges in identifying lands that have access to both employment opportunities and infrastructure.

The stopgap funding bill paves the way for Republican lawmakers to pivot to signature border and tax bills they seek to pass in the coming months.

Mixed Reaction to Retail Sales Makes For a Boring Monday

Despite coming in much weaker than expected, Retail Sales (the day’s only big-ticket market mover) didn’t provide much help for bonds. The catch was that the key internal component (the control group, aka retail sales excluding autos/gas/building materials) was stronger than expected. Bonds lost ground on the news, but began to rally about 30 minutes later. The net effect was essentially a restoration of Friday’s average mid-day trading levels, thus making for a ho-hum Monday.  

Econ Data / Events

Retail Sales

0.2 vs 0.6 f’cast, -0.9 prev

Retail Sales “control group”

1.0 vs 0.3 f’cast

NY Fed Manufacturing

-20 vs -0.75 f’cast, 5.7 prev

Business Inventories

0.3 vs 0.3 f’cast, -0.2 prev

NAHB Builder Confidence

39 vs 42 f’cast, 42 prev

Market Movement Recap

08:35 AM Weaker after retail sales, but a hair stronger on the day.  MBS up 1 tick (.03) and 10yr down 0.2bps at 4.311.

12:28 PM Nice recovery for reasons unknown (some big trades at 9:20am, but that’s about it). MBS up 5 ticks (.16) and 10yr down 4.8bps at 4.265

03:31 PM Losing some ground in the PM hours, but still slightly stronger.  MBS up 2 ticks (.06) and 10yr down 0.6bps at 4.307

“My friend showed me a photo of a famous meteor crater in Arizona. It’s amazing how close it landed to the Visitor’s Center!” Here in Tucson, the weather is fine but “tornado season” has hit with a vengeance in other parts of the United States. Anyone who thinks that the severity of storms is declining should reconsider. (Catastrophe and disaster updates below.) For some good news, call it “kicking the can down the road” or a “budget plan,” but Congress passed the budget appropriations bill, and it was signed by President Trump over the weekend. In six months we’ll get to watch it all over again. But for lenders, kicking the can down the road is not an option. Our MBA presented the IMB profit figures: tepid at best, and some would say indicate that there will be no easy sledding ahead. “Independent mortgage banks (IMBs) and mortgage subsidiaries of chartered banks reported a pre-tax net loss of $40 on each loan they originated in the fourth quarter of 2024, a decrease from the reported net profit of $701 per loan in the third quarter of 2024… (lots of stats below). (Today’s podcast can be found here and this week’s is sponsored by CoreLogic. Whether it’s using cash to purchase a home, debt consolidation, or a straight cash-out refinance, CoreLogic’s Precision Marketing’s data-driven insights pinpoint your best opportunities to retain and recapture your clients. Today’s has an interview with CMG and WIMIN’s Sharon Barney on experiences, challenges, and successes of women in the mortgage industry.)

After improving modestly in the overnight session, bonds contended with the Retail Sales data at 8:30am ET.  At first glance, it should have been helpful, given that the headline came in at 0.2 versus a forecast of 0.6, but the closely watched control group (which excludes cars, fuel, and building materials) was much higher than expected. With that, bonds briefly the overnight gains. They’ve been bouncing back ever since. Some of that bounce has to do with a glut of bond buying 10 minutes before the 9:30am NYSE open.  The rest may be down to the inability of stocks to sustain a rally in early trading.