10yr yields drifted up toward the 4.20% technical level overnight but buyers showed up at the 8:20am CME open. The initial recovery looks more technical in nature. The subsequent buying brought bonds into positive territory and likely had more to do with the day’s only real econ data: the NY Fed Survey of Consumer Expectations. The data showed an uptick in unemployment expectations as well as a softening in other labor market metrics. This isn’t normally a market mover, but sensitivity is somewhat higher due to the absence of last week’s jobs report. 

President Trump has recommended that publicly held companies only report earnings every six months instead of every three. Don’t stockholders deserve more timely information to make educated choices, not less? For example, bond market investors who rely on government releases to make decisions seem nearly frozen in their tracks, and the government has only been shut down for about a week. Lenders try to learn things from every source, and in today’s Advisory Angle at 2PM ET, powered by the Chrisman Commentary, STRATMOR’s Garth Graham, Sue Woodard, Will Ayer, and Madison Ayer reveal what the mortgage industry can learn from hospitality, exploring how lenders can systematize service to create borrower experiences that drive clarity, confidence, and lasting loyalty. Speaking of learning things, thank you to everyone who wrote yesterday reminding me that, given the Fifth Third/Comerica news, Comerica Bank exited the warehouse lending business in 2023 during the regional bank liquidity crisis. (Plenty of other banks have stepped in: If you’d like your warehouse services listed in the Marketplace, please send an email for details.) (Today’s podcast can be found here and this week’s are sponsored by Truework, the only all-in-one, automated VOIEA platform that helps mortgage providers achieve up to 50 percent cost savings with an industry leading 75 percent completion rate. Today’s features an interview with Truework’s Randy Lightbody on the Fed’s recent rate cut and its impact on borrower behavior, what lenders should watch for, how homebuyers might respond to lower rates, and the critical role of integration and automation in building a more efficient, sustainable path to homeownership.)

Affordability has improved and rate drops have exposed millions to incentives, but many more must wait for a break, ICE Mortgage Technology found.

President Trump said big homebuilders are sitting on a record 2 million empty lots, and asked Fannie Mae and Freddie Mac to help restore the American Dream.

Rithm Capital, a real estate investment trust, is sponsoring the deal, in which property focused investor loans represent 32.60% of the collateral pool.

The Office of the Comptroller of the Currency Monday said it will scrap fair housing reporting requirements, fast-track licensing for small banks and simplify regulation for smaller institutions overall.

The NCUA, as liquidating agent for three failed corporate credit unions, sued in 2018 claiming U.S. Bank failed to perform its role as RMBS trustee.

Mortgage rates began the week right in line with their highest levels of the past 30 days.  This sounds a bit more dramatic than it is because the past 2.5 weeks have been very narrow and today’s rates are merely at the upper edge of that range (i.e. not much different than the recent lows). There were no meaningful economic reports driving volatility in the underlying bond market (bonds dictate rates), but overseas developments caused broad bond market weakness overnight.  Weaker bonds = higher rates, all else equal. More extreme rate movement remains on hold until the government shutdown ends, thus allowing the publication of the big-ticket economic reports that have the biggest impacts on rates.

Incidental Weakness But No Big Picture Change

There were no economic reports on tap today and no obvious market moving headlines during the domestic session. The lighter volume and liquidity made the bond market more susceptible to random sources of inspiration in the overnight session. Political developments in Japan were thus able to have a larger impact than normal and, in this case, that impact was unfavorable for bonds. That said, the selling was ultimately moderate. Larger scale momentum requires an end to the shutdown (thus allowing things like the jobs report to be published).

Econ Data / Events

ISM Biz Activity (Sep)

49.9 vs 51.8 f’cast, 55 prev

ISM N-Mfg PMI (Sep)

50.0 vs 51.7 f’cast, 52.0 prev

ISM Services Employment (Sep)

47.2 vs — f’cast, 46.5 prev

ISM Services New Orders (Sep)

50.4 vs — f’cast, 56.0 prev

ISM Services Prices (Sep)

69.4 vs — f’cast, 69.2 prev

Market Movement Recap

10:51 AM weaker overnight with a modest recovery early.  MBS down 1 tick (.03) and 10yr up 2.6bps at 4.143

03:03 PM Gradually weaker and now at the weakest levels of the day.  MBS down 6 ticks (.19) and 10yr up 4.6bps at 4.164

On paper, it was supposed to have been a sleepy session for bonds with nothing of note on the econ calendar. But in practice, we’re seeing one of the larger instances of overnight selling in months. Ironically, the extreme absence of domestic market movers can grease the skids for more volatility (via illiquidity) if unexpected motivations pop up.  That’s arguably the case overnight as political developments in Japan and the EU pushed yields higher in both sessions (but mainly the former).