Focus Shifts to Next Week’s High Stakes CPI

Bonds lost ground at the fastest pace of the week on Friday, but even that ended up being insignificant in the bigger picture. The bottom line is that this week’s trading helped solidify and consolidate the gains seen after last week’s jobs report. With nothing of note on tap today, focus quickly shifted to the risks/opportunities inherent in next Tuesday’s CPI report–one of two key players when it comes to determining the next big move for rates (the other being the next jobs report in early September). Higher inflation would suggest bonds erase more of their post-NFP gains whereas lower inflation would argue for another challenge to the 10yr technical floor at 4.20%. 

Econ Data / Events

Jobless Claims

226k vs 221k f’cast, 219k prev

Continuing Claims

1974k vs 1950k f’cast, 1936k prev

Market Movement Recap

10:11 AM Losing ground fairly steadily this morning.  MBS down an eighth and 10yr up 2bps at 4.275

01:01 PM Flat after initial selling.  MBS down 3 ticks (.09) and 10yr up 2.9bps at 4.284

03:24 PM Treasuries heading out at weakest levels with 10yr up 3.1bps at 4.286.  MBS still steady with a 3 tick (.09) loss.

Any week in early August (before anyone is back to school yet) classifies a “dog days of summer” type of week for the bond market. Movement is more random. Ranges are narrower. And major technical levels are rarely challenged in a significant way. Think of the present week like this. Last Friday saw 10yr yields drop from 4.4 to 4.2.  Junior traders could be left with the instruction to sell 4.2 and buy 4.25 in the following week. That’s what we saw Monday through Thursday. Now today, yields are creeping up just a bit more amid light volume and light liquidity. 

It’s not a move that we’d read too much into. In fact, 4.28 had been the only major technical level overhead after bouncing at 4.19 on Mon/Tue.  We won’t get a good idea of the current state of bond market momentum until next Tuesday’s CPI.  Bottom line: incidental and inconsequential weakness so far this morning, but still squarely in “victory” territory as far as the past 3 months are concerned.

People gearing up for the Western Secondary in Southern California see that “technology” is on the agenda. (Of course, it is always on every agenda, right?) Is the making of baby carrots considered “technology”? When Google tells you that part of its sales business was hacked, do you even care? On Monday, Jessica Evett, SVP of Product Strategy and Technology Ops, CloudVirga, discussing how to think about what point of sale means now? Where is the data we need and how do we collect and verify it for approval? Embalmers don’t read this Commentary, nor do they use a lot of technology: Embalmers are on this list of jobs least likely to be affected by AI. (Remember the source.) There’s also a list of jobs in that link likely to be most affected by AI. Ugh. Do you need digital project intelligence, helping your forecast your, and your company’s, business? There’s Shilo AI; “the innovative force in real estate technology” that just raised $2.6 million in its latest funding round. Don’t forget: Never take meeting notes again. Get transcripts, automated summaries, action items, and chat with Otter.AI to get answers from your meetings. (Today’s podcast can be found here and Sponsored by Total Expert, the purpose-built customer engagement platform trusted by hundreds of modern financial institutions. Total Expert turns customer data into actionable insights that help lenders engage and guide consumers through complex financial decisions. Hear an interview with Ardley’s Nathan Den Herder and Taylor Potter on borrower behavior and loan data from portfolios in the second quarter.)

Mortgage application activity rebounded last week as falling rates boosted both purchase and refinance demand. The Mortgage Bankers Association’s weekly survey for the week ending August 1, 2025, showed a 3.1% increase in the seasonally adjusted Composite Index from the prior week. “Mortgage rates moved lower last week, following declining Treasury yields as economic data releases signaled a weakening U.S. economy,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “As a result, the 30-year fixed rate decreased for the third straight week to 6.77%, and applications for both purchase and refinance increased.” The Refinance Index rose 5% week-over-week and is 18% higher than the same week in 2024. The seasonally adjusted Purchase Index increased 2% (unadjusted up 1%) and is also 18% above year-ago levels. The refinance share of total mortgage applications increased to 41.5% from 40.7% the previous week.  It’s now at its highest level since April. The adjustable-rate mortgage (ARM) share rose to 8.5%. FHA share edged down to 18.5% from 18.8%, while VA share increased to 13.3% from 12.2%. Mortgage Rate Summary:
30yr Fixed: 6.77% (from 6.83%) | Points: 0.59 (from 0.60)
15yr Fixed: 6.03% (from 6.12%) | Points: 0.66 (from 0.64)
Jumbo 30yr: 6.65% (from 6.74%) | Points: 0.59 (from 0.51)
FHA: 6.47% (from 6.56%) | Points: 0.81 (from 0.83)
5/1 ARM: 6.06% (from 6.22%) | Points: 0.49 (from 0.51)

The lender and servicer, which posted stronger originations, suggested more efficient production with improvements including renegotiated vendor contracts.

A credit analyst manually reviews the pool’s underwriting decisions, instead of just leaving it all to automated underwriting methods.

President Trump’s imposition of sweeping tariffs on more than 90 countries Thursday represents a major shift in the U.S. trade stance, but the impact on inflation, the Federal Reserve and the economy are still unclear.

President Trump said Thursday that he will nominate Stephen Miran, who currently serves as chair of the White House Council of Economic Advisers, as the next member of the Federal Reserve Board of Governors. Miran is a key architect of President Donald Trump’s tariff policy.

Both originations and servicing segments contributed to the second-quarter’s positive numbers, with production up by over 14% year over year.

Fairly Resilient Despite Bumpy Auction

The relevant morning econ data was limited to Jobless Claims. While the weekly and continuing numbers were both higher than expected, it wasn’t a big enough miss to spark any sort of decisive rally in bonds. MBS lost ground heading into the PM hours and lost some more ground after a poorly received 30yr bond auction. But whereas the auction could have been used as a front for additional selling, bonds generally did a decent job of holding their ground in the last few hours of the day. Friday’s calendar is empty. This doesn’t mean we won’t see any volatility–simply that it could not be driven by scheduled events.

Econ Data / Events

Jobless Claims

226k vs 221k f’cast, 219k prev

Continuing Claims

1974k vs 1950k f’cast, 1936k prev

Market Movement Recap

08:31 AM ho-hum Jobless Claims.  No reaction.  10yr up 0.3bps at 4.231 MBS up 1 tick (.03)

11:55 AM Still flat.  MBS unchanged and 10yr unchanged at 4.227

01:06 PM weaker after 30yr auction.  MBS down 2 ticks (.06) and 10yr up 1.7bps at 4.245

02:55 PM avoiding sharper losses.  MBS down 3 ticks (.09) and 10yr up 1.5bps at 4.243