Best Closing Levels in More Than a Month

Best Closing Levels in More Than a Month

Don’t look now, but rates just inched their way down to the best levels since the first week of May.  It’s probably NOT fair to credit geopolitical developments for the bond market improvement.  While those developments arguably had an impact at times during the day, they were also arguably a zero sum game by the end of the day (due to a rapid de-escalation of armed conflict).  What’s left over is the improvement seen earlier in the day due to the shift in Fed Funds Rate expectations after comments from Bowman.  This no doubt increases the market’s anticipation for Fed Chair Powell’s congressional testimony over the next two days.

Econ Data / Events

S&P Services PMI

53.1 vs 52.9 f’cast, 53.7 prev

Existing Home Sales

4.03m vs 3.96m f’cast, 4.00m prev

Market Movement Recap

10:10 AM Modestly stronger overnight with additional gains after Bowman comments on supporting a July rate cut.  MBS up 6 ticks (.19) and 10yr down 6.3bps at 4.315

12:38 PM Slow, steady bond gains over the past 2 hours.  10yr down 8.3bps to 4.296 and MBS up 9 ticks (.28).

02:43 PM Off the strongest levels but still stronger on the day.  MBS up 7 ticks (.22) and 10yr down 5.8bps at 4.321

03:40 PM Technically down an eighth from the highs.  MBS still up 6 ticks (.19) and 10yr still down 4.6bps at 4.333

Bonds Don’t Always React to “War” Like You’d Expect

A vast majority of long-time bond watchers share the same general understanding of how war impacts rates. Specifically, the increased global economic uncertainty drives safe-haven demand for US Treasuries, thus helping rates. While this CAN be true, it’s not a hard and fast rule. Consider the Russia/Ukraine example in which an initial drop in rates gave way to a paradoxical spike due to inflation implications. Keen observers anticipated a similar risk over the weekend with respect to oil prices. Alas! Not only have oil prices barely budged over the weekend, but bonds didn’t respond as expected when they initially spiked 2 weeks ago.

Over the weekend, there was initially no reaction whatsoever.  As the day gets underway, bonds are stronger–partially due to reports that there was no radioactive contamination after the attack and partially due to unrelated dovish comments from Fed’s Bowman.

HELOCs and 2nds, Doc Tracking, Execution, POS, Webinars and Training; Rates Steady Despite Iran Conflict

For many, business is slow out there, and the industry waits for the House vote on the abusive trigger lead bill. Depository banks continue to focus on residential lending in their own footprint while scaling back distant originations, and IMBs continue to look at staffing with a critical eye. A safe prediction is that this will continue, although people have grown more skeptical of others making predictions to grab headlines. A recession has yet to materialize, nor has a tidal wave of delinquencies and foreclosures. In fact, quite the opposite: The OCC Mortgage Metrics Report, First Quarter 2025 showed that 97.6 percent of mortgages included in the report were current and performing at the end of the quarter, an increase from 97.4 percent one year earlier. And The percentage of seriously delinquent mortgages decreased from the first quarter of 2024. MLOs motor forward and on today’s episode of Now Next Later at 10am PT, Sasha and Jeremy welcome Jake Vermillion, CMO at Mortgage Champions, to discuss the evolving role of mortgage loan officers and its impact on training and performance. (Today’s podcast can be found here and this week is sponsored by Optimal Blue. OB bridges the primary and secondary mortgage markets to deliver the industry’s only end-to-end capital markets platform, helping lenders maximize profitability and operate efficiently so they can help American borrowers achieve the dream of homeownership. Today’s has an interview with Argyle’s John Hardesty on what’s driving lender migration in the LOS and POS space, how tech stacks are being evaluated more strategically, why “conversion” matters more than ever in verification workflows, and what true interoperability means for mortgage fintech.)

Mortgage Rates Lowest Since May 1st

Mortgage rates ended the previous week roughly in line with the best levels since May 1st.  Today’s modest improvement made it official.  Mortgage rates are primarily a function of trading levels in the bond market and bonds have had a few reasons to move at the start of the new week. There’s a small case to be made that U.S. involvement in the conflict between Israel and Iran contributed to bond market strength and, thus, lower mortgage rates today.  Less debatable is the fact that Fed Vice Chair Bowman commented on the possibility of cutting rates at the July meeting. This echoes sentiments shared by Fed’s Waller last week.  Unlike actual rate cuts (which often do little or nothing to help mortgage rates by the time they happen), changes in rate cut  expectations can impact longer-term rates in real time. In other words, by the time the Fed actually meets and cuts rates, the market has already had plenty of time to get in position for that due to comments from Fed speakers and economic data.

Housing Starts Slide in May, But Single-Family Holds Steady

The latest Residential Construction report from the Census Bureau showed a noticeable drop in overall housing starts in May, though single-family activity managed a small gain. Building permits also declined, continuing a trend of slight cooling in new construction momentum. As usual, the market focuses most on building permits and housing starts , with the latter representing the beginning of actual construction activity. Total starts fell nearly 10% to an annual pace of 1.256 million , down from 1.392 million in April. The decline was almost entirely due to a sharp drop in multifamily starts , which fell from 420k to 316k , the lowest level in over a year. In contrast, single-family starts edged up slightly to 924k from 920k . Building permits—a forward-looking indicator—also declined, dropping 2% from 1.422 million to 1.393 million . That included a 2.7% decline in single-family permits and a moderate slowdown in multifamily authorizations.