Mortgage rates remain elevated relative to the levels seen in September and early October, but they’ve definitely moved down a bit from their recent highs.  Thanksgiving week saw the lowest daily average rate in exactly a month, but there’s never a guarantee the rate market will look the same on the following week.  Thankfully, it’s almost perfectly unchanged this time around. The average lender is still able to offer top tier conventional 30yr fixed rates just under 7% for the 4th straight day.  There were no major sources of inspiration today, but that will change as the week progresses.  Friday’s jobs report is especially significant. The same report has had the biggest impact of any economic report on multiple occasions in the past few months.

Bonds Hold Vast Majority of Last Week’s Gains

The most significant thing that happened as the market returned to the office from Thanksgiving weekend is that bonds were able to hold a vasty majority of last week’s gains.  That wasn’t immediately apparent if you were focusing on day-over-day losses, but consider that Friday afternoon saw a quick little rally that made for artificially strong closing levels. Any way you slice it, today’s yields remained roughly 20bps lower than those at the end of the week before last. This is as strong of a showing as we could have hoped for in the absence of any bond-friendly economic data.  The rest of the week is most likely to flow logically from the incoming data. As for today itself, it was mostly uneventful with “new month” and repositioning trades accounting for a mid day recovery from early weakness. 

Econ Data / Events

GDP

2.8 vs 2.8 f’cast

Jobless Claims

213k vs 216k f’cast

Continued Claims

1.907m vs 1.910m f’cast

Core PCE Q/Q 

2.1 vs 2.2 f’cast, 2.8 prev

Core PCE M/M

0.3 vs  0.3 f’cast, 0.3 prev

Core PCE Y/Y

2.8 vs 2.8 f’cast, 2.7 prev

Market Movement Recap

09:18 AM Giving back some of Friday’s ephemeral gains. MBS down 10 ticks (.31) and 10yr up 5bps at 4.221. 

12:16 PM decent gains heading into mid-day.  No obvious motivations apart from geopolitical tensions flaring again.  MBS down 5 ticks (.16) and 10yr up 1.1bps at 4.182 

03:52 PM Small friendly bump after Fed’s Waller’s comments.  MBS down an eighth and 10yr up 1.2bps at 4.183

It can be a bit tricky to understand the roll of various forms of positioning when it comes to otherwise inexplicable movement in the bond market.  It’s also a fairly vague term that can refer to several different things. These include month-end trading, new-month trading, position squaring and short covering, to name the usual suspects. The effects of position-driven trading are amplified by the low volume and light liquidity of a major holiday weekend, and all of the above are playing a role in this morning’s weakness.  In a nutshell, there was never any genuine strength after last Friday’s opening bell.  We actually specifically entertained the possibility of short-covering driving those gains.  This morning, we’re simply seeing those short-positions being re-entered. 

The Mortgage Bankers Association (MBA) released its weekly application survey results on Wednesday.  The highlight was a 12.43% increase in purchase applications from the previous week.  That brought the purchase index to the highest levels since February. As has been and continues to be the case, there’s an obvious counterpoint to any of these periodic surges: the broader context.  In other words, yes, these are the highest levels since February, but even if we go back to February 2023, the range since then is historically low and sideways. With that in mind, we’re equipped to digest the refinance index with a grain of salt.  At first glance, we might lament the evaporation of the recent surge in September. But the broader context suggests that we can simply be in a perpetual state of lamenting refi demand for more than 2 years now. Other highlights from this week’s application data (current week change % vs previous week):
Refinance share of total apps

38.8  vs 41.0

FHA share of total apps

16.0 vs 16.6

VA share of total apps

12.4 vs 13.6

Week over week change in interest rates
Conforming 30yr fixed

6.86 vs 6.90

Jumbo 30yr

6.97  vs 7.03

FHA 30yr

6.61 vs 6.68

“I was late to my cannibal family’s Thanksgiving dinner. I got the cold shoulder.” LOs are experts on family life and demographics. The share of both same-sex and opposite-sex households with children under 18 (married and unmarried) declined from 2019 to 2023 , a reflection of drops in U.S. fertility rates. Among female couple households, 25 percent of married and 16 percent of unmarried couples had children in the household in 2023. Among male couples, 9 percent of married and 3 percent of unmarried couples had children in the household. About 21 percent of female couple households included a child in 2023, compared to just 6 percent of male couple households. A house hunter recently told me, “I’m not going to AI buy my house.” NAR is good at producing reports on how people actually do buy and sell houses , and it is worth a gander. (Today’s podcast can be found here and this week’s are sponsored by Truework . By connecting every verification method into one platform, Truework helps lenders eliminate process disruptions, maintain a competitive borrower experience, and reduce the fiscal impact of verifying income. Hear an interview with A and N Mortgage Services’ Neena Vlamis, Wilqo’s Lance Reese, and MCT’s Chris Anderson on data security and the importance of access to data for the mortgage industry.)

For the second time in the past three weeks, the 30-year fixed mortgage moved lower, but investors want clarity about U.S. economic policy, Freddie Mac said.

The latest plans include details on promoting housing development in underserved areas and increasing secondary market access to rural institutions.

The economist, who runs Roubini Macro Associates, is positioning for a curve steepener, a popular Treasuries trade where the gap between long- and short-dated yields widens.

The so-called core personal consumption expenditures price index, which strips out volatile food and energy items, increased 2.8% from October last year and 0.3% from a month earlier, according to Bureau of Economic Analysis data out Wednesday.

The trade group agreed to the settlement in March, which included paying $418 million to settle claims.