Mortgage rates went into the weekend with a small cushion thanks to movement in the bond market on Friday. Specifically, bonds improved after mortgage rates came out for the day. If the improvement had been sharper, mortgage lenders likely would have made a mid-day adjustment to slightly lower levels. The implication was that rates would have been slightly lower this morning if bonds managed to hold the same levels over the weekend. Unfortunately, bonds lost enough ground to overshadow Friday’s cushion, just slightly. The net effect is an average top-tier 30yr fixed rate that is 0.02% higher versus Friday morning–a minimal change considering the day-over-day losses in the bond market. With that, the average lender remains well inside the the 0.10 range that’s been in place since October 29th.  Bond markets are closed tomorrow for Veterans Day. When markets reopen on Wednesday, the prospects for ending the government shutdown may be coming into clearer view and that could cause enough market volatility to spill over into rates. If today’s trading was any clue, a “reopening” event is more likely to put upward pressure on rates, but today’s rate increase could already be reflecting those expectations. 

Counting Down to Ending The Shutdown After Tuesday’s Holiday Closure

Bonds were weaker in the overnight session with at least some of the blame presumably going to a sudden improvement in the prospects for reopening the government. To whatever extent that blame is merited, the rest of the week is increasingly interesting. Tuesday is fully closed due to the Veterans Day holiday. A House vote on a shutdown resolution could happen as early as Wednesday. Even if the vote is looking more like Thu/Fri, any headlines that clarify the timeline or the details could be tradeable events.

Market Movement Recap

10:21 AM Moderately weaker overnight, but rallying back a bit now.  MBS down an eighth and 10yr up less than 1bp at 4.100

02:04 PM A hair weaker vs AM levels despite well-received 3yr TSY auction.  MBS down 6 ticks (.19) and 10yr up 1.8bps at 4.111

If members of the House can make it back to D.C. in sufficient numbers, there’s a real possibility that the shutdown will end this week. Some marketplace chatter is attempting to connect overnight bond market weakness to those prospects, but an early recovery suggests some skepticism (because the recovery didn’t coincide with any new news on the shutdown). Still, a logical case could be made for bond weakness when the shutdown ends, assuming a prolonged shutdown increasingly harms the economy. Either way, the real reaction will be reserved for real confirmation. Despite assumptive headlines, this would likely take several days at best.  From there, it’s not as if econ data is ready to release (other than the September jobs report).

President Trump and housing regulator Bill Pulte are considering introducing a 50-year fixed rate mortgage that Fannie Mae and Freddie Mac would purchase.

The impacts of the federal government shutdown are hitting both originators and servicers, and as things drag out, the disruptions will increase.

The bill would provide pay for furloughed government workers, resume withheld federal payments to states and localities and recall agency employees who were laid off during the shutdown.

The FHFA director hinted at a partnership in the works and doubled down on criticism of homebuilders and the Fed chair in a housing conference interview.

A trade group for participants in the clean energy loan program argues the upcoming regulations will be too burdensome and costly for participants.

The volume of home equity lines of credit expanded for the 14th consecutive quarter, driven largely by fintechs and other nonbanks that are accounting for more and more of the business.

The Consumer Financial Protection Bureau ended a consent order earlier than expected against the credit bureau TransUnion, saying the company already paid a $5 million fine and $3 million to consumers.