Most of the investment community overall showed more favorable sentiment toward one presidential candidate than the other, but a subset of it begs to differ.

Over 4 million residents in the region, both coastal and inland, face dangers similar to residents in Hurricane-weary Florida, Louisiana and Texas.

The Federal Reserve and the Consumer Financial Protection Bureau moderately increased the minimum prices at which the Truth in Lending Act applies to loans and leases.

National issues such as the economy are prominent. But so are local concerns like a $10,000 limit on deductions for state and local taxes and high housing costs.

The administration wants to implement a 36 hour window of time for companies to report a cyber incident to the agency.

Today’s much-anticipated jobs report ended up coming out much stronger than expected.  A stronger result was all but guaranteed to cause carnage (relative) in the mortgage market and that’s definitely what we’re seeing.  A caveat is that rates are still much lower than they were several months ago, but the average lender is now back in line with mid August levels.  Additionally, this is one of the largest single day jumps we’ve seen with the average 30yr fixed rate moving from 6.26 to  6.53.  A move of more than 0.25% in a single day is tremendously uncommon, but it can happen due to the underlying structure of the mortgage bond market.  For those who would like to nerd out on those details, here you go: Whether a mortgage lender is lending their own stockpiles of cash or temporary cash obtained from a credit line, the chunk of cash wired to escrow at closing carries a cost.  For a majority of mortgage lenders, the day to day changes in those costs are determined by the trading of mortgage-backed securities (MBS). MBS are similar to bonds like Treasuries in that investors pay a lump sum of cash and earn interest over time.  They’re different in several key ways.  The most important difference is that the “borrower” of US Treasuries (i.e. the US Government) cannot return principal to the investor and end the deal.  It must continue to pay for as long as it agreed. Mortgage borrowers, on the other hand, can sell/refi/etc and end the mortgage that underlies the mortgage-backed security.  This introduces an element of uncertainty for investors that will be important in a moment.

Who Lied About Jobs Numbers?

Unpleasant day for the bond market with jobs crushing forecasts and being revised higher for the past 2 months.  We knew it would be high stakes and the magnitude of the reaction makes good sense relative to the data.  But how do we reconcile this against the weaker jobs numbers in the past 2 months?  And what about reports of a record number of government jobs?  As is often the case, there are nuances and today’s MBS Live recap video offers a deep dive that will help clear up a few of them.  If you don’t have time to watch, the takeaway is that Federal gov jobs were basically flat (adding 1k payrolls whereas state/local gov added 29k payrolls).  For context, the biggest categories in health care and food service each added more than 70k jobs.  

Econ Data / Events

Nonfarm Payrolls

254k vs 140k f’cast, 159k prev

Unemployment Rate

4.1 vs 4.2 f’cast

Wages

0.4 vs 0.3 f’cast
last month revised up to 0.5

Market Movement Recap

08:33 AM Bonds destroyed after strong jobs report.  MBS down almost half a point.  10yr up 9.5bps at 3.943

11:32 AM Flat and right in line with initial sell-off levels.  MBS down half a point.  10yr up 11bps at 3.956

03:09 PM weaker drift continues. 10yr yields up 13.5bps at 3.982.  MBS down 5/8ths of a point. 

It is a very simple day for the bond market.  There was a ton of anticipation for today’s jobs report after the past two iterations raised concerns about flagging labor market conditions.  Indeed, the Fed’s decision to cut by 0.50 vs 0.25 last month had much to do with the fear/expectation that reports like today’s would be in shorter supply going forward.  In other words, a 0.25% cut would have been more likely if they knew that today’s NFP would come in at 254k vs 140k with unemployment ticking down to 4.1%.  The bond market is taking care of it though.  Futures have priced 2024 rate cuts back to levels seen before the last jobs report. Bonds are tanking, as you’d expect.  The only salvation here would be the notion that this is just one jobs report in a recent run that’s been mostly weaker and that perhaps the next one won’t be so damning for bonds. 

As Maui grapples with rebuilding, and parts of the Southeast deal with continued rescue or recovery issues, where would our lives be without some levity? Rich Swerbinsky, Founder of Onward and Upward Consulting, has updated his “40 Greatest Names in the Mortgage Industry list.” (Contributions or comments should be addressed to him, not me.) Speaking of names, “Springfield” has certainly been in the news lately, but that Ohio city’s name is only one of the most popular. Top place names in the U.S. include Franklin, Springfield, Washington, Clinton, and Arlington. If you’d like to find a top rated charity in the United States, one where most of your contribution goes toward victims of a disaster instead of salaries and overhead, here you go. In terms of top rated survival real estate listings, there’s something for everybody out there! For example, “Find your secure and sustainable home. The leading marketplace for rural, remote, and off-grid properties worldwide.” (If you think that you have trouble with your basement flooding, try owning a place 50 feet underground. (Today’s podcast is found here and this week’s is sponsored by Candor. Candor’s authentic Expert System AI has powered more than 2 million flawless, hands off underwrites. Every credit risk decision Candor makes is backed by a Warranty, eliminating repurchase worries. Hear an interview with author Anna DeSimone on hidden biases in mortgage lending and how consumers can properly vet financial institutions.)

Buyers aren’t necessarily responding to greater inventory and lower mortgage rates.