It depends quite a bit on the lender in question, but at some point between yesterday morning and this morning, the average lender dropped rates at the fastest single-day pace in months. Before you get excited, there’s a catch–two or three of them actually. The first catch is that some lenders split that improvement between yesterday afternoon and this morning. The more general catch is that these sorts of “biggest drop in a long time” observations are almost always seen after rates have just surged to “the highest levels in a long time.” That’s absolutely the case this time around. The third catch isn’t too important. It involves a bit of deterioration in the bond market resulting in some lenders bumping rates slightly higher this afternoon. The average lender is still in much better shape than yesterday morning (and much worse shape than most any other morning going back to June 2001). Moving on from “catches” to plain old frustrating uncertainty, mortgage rates need new economic data in order to improve. Specifically, rates would need to see less resilience and growth in the economy. Frustratingly, the government shutdown (which looks likely if not certain as of this writing) would prevent several of the most important reports from coming out next week. Granted, if those reports had come out strong, they would push rates higher, but as it stands, we don’t even have an opportunity for meaningful improvement.
Source: Mortgage News Daily
Bonds Almost Hold Onto Gains Ahead of Shutdown Uncertainty
Bonds improved moderately overnight, adding onto what was already a fairly substantial recovery yesterday. The morning’s PCE data was slightly lower than expected, but bonds didn’t seem unequivocally happy about that. There was a modest extension of the rally and then a slow give-back into the PM hours. Trading was very flat near unchanged levels after noon ET. Month/Quarter-end tradeflows are assumed to be underpinning some of the volatility of the past 3 days, as is the uncertainty surrounding the government shutdown. The most direct implication for bonds is that they must navigate the most important data week of the month without the most important data (no jobs report or JOLTS next week due to the shutdown).
Econ Data / Events
Core PCE m/m
0.1 vs 0.2 f’cast, 0.2 prev
Core PCE y/y
3.9 vs 3.9 f’cast, 4.3 prev
Market Movement Recap
08:46 AM Moderately stronger overnight with some additional improvement after data. 10yr down 5+bps at 4.524. MBS up just over a quarter point.
11:11 AM Giving up some gains. MBS off a quarter point from highs, but still up nearly an eighth on the day. 10yr still down 4bps on the day but up 3bps from lows.
03:13 PM Weakest levels of the day for 10s, up 1bp at 4.588. Weakest liquid levels for MBS, down an eighth of a point in 6.0 coupons.
Source: Mortgage News Daily
The trading day began on a fairly positive note with a strong hand-off from Europe and reasonably friendly inflation data at 8:30am. After a few moments of indecision, bonds rallied modestly on the data, but have been giving back the gains as we head into the PM hours. The rest of the day may be dictated by month/quarter-end tradeflows and government shutdown headlines. Notably, there is a clear Fed trade pattern in stocks and bonds, suggesting markets are actively adjusting Fed policy expectations based on data and events.
Source: Mortgage News Daily
Shutdown or no shutdown, the National Park Service’s Fat Bear Week is approaching, focused on how these behemoths tip the scale. Here’s your tip of the day: Having books in your Zoom background makes you seem more trustworthy. What if one of them is “The Complete Idiot’s Guide to Mortgages”? Maybe put some gold bars on the shelf instead? You can buy them now at Costco. Owning a home is a great way to build wealth, although mortgage rates are at 23-year high and mortgage applications have fallen 27 percent year-over-year… is your staffing down 27 percent from a year ago? (I know that’s simplistic, but…) At least you’re not Tanner Winterhof whom the Federal Reserve issued an enforcement action on for falsification of bank documents. On the more constructive side of things, originators and others can learn about special-purpose credit programs (set out unique standards and benefits to make loan qualification easier for people who are from underserved populations) in today’s Mortgage Collaborative’s Rundown at 3PM ET. (Today’s podcast can be found here and this week’s is sponsored by Built. Built is powering smarter and faster money movement for the entire construction and real estate ecosystem, all while reducing risk. Hear an interview with LoanSense’s Catalina Kaiyoorawongs on why resuming student loan payments matters to the mortgage industry.) Lender and Broker Software, Programs, and Services In challenging down economic times, Loan Vision is your solution to maximizing profitability and reducing costs in your business. With Loan Vision, companies see improvements of 25 to 35 percent decrease in days to close the books, 20 percent reduction in accounting headcount, complete LOS to G/L automation, and improved reporting and visibility that allow for better business decisions. Don’t accept a competitive disadvantage or get caught flat footed in a recovering market. To improve your cash position, gain a competitive edge, and prepare your business for sustained growth, contact Carl Wooloff to schedule a call today.
Source: Mortgage News Daily
Bonds Bounce Despite Stronger Data
Bonds lost ground overnight and logically added to the losses after the morning’s Jobless Claims data. Dovish comments from Fed’s Goolsbee helped push back in the other direction and month-end tradeflows added to gains in the afternoon. All told, it was a token correction much like last Friday’s, but one that had more of a foundation in a relevant market movement factor (i.e. new ideas from Goolsbee on the Fed possibly being able to claim some victories on inflation without the need to visibly damage the labor market as evidence of success).
Econ Data / Events
Jobless Claims
204k vs 215k f’cast, 202k prev
GDP (Q4 final)
2.1 vs 2.1 f’cast, 2.0 prev
GDP Delator
1.7 vs 2.0 f’cast, 4.1 prev
Market Movement Recap
08:49 AM Weaker overnight and additional selling after data (despite an initial, paradoxical mini rally). 10s up 6bps at 4.667. MBS down 3/8ths after factoring out some illiquidity
12:24 PM Back into positive territory on gradual gains kicked off by Goolsbee comments. MBS up 3 ticks (.19). 10yr still up 1.1bps at 4.618, but down from highs of 4.688.
02:58 PM Best levels of the day with MBS up 6 ticks (.19) and 10s down about half a bp at 4.601
Source: Mortgage News Daily
The past few days have seen rates surge to new multi-decade highs with the average lender quoting 7.6+ for top tier conventional 30yr fixed scenarios. Not too much has changed today apart from the direction of the movement and the fact that modest gains weren’t brutally dashed as the day progressed. In fact, most lenders updated rates for the better at some point today as the underlying bond market improved. The caveat is that the outright levels aren’t much lower than yesterday’s multi-decade highs. Nonetheless… longest journeys, single steps, and all that… Any time rates skyrocket–whether for a period of hours, days, or months–market watchers are on the lookout for a bounce. Bounces come in all shapes and sizes. In all cases, it only ever makes sense to take them one day at a time until a clear trend has been established. Furthermore, that trend has to have backing from a clear shift in the economic data and Fed policy stance. The current bounce is best measured in “hours” so far. We’re a long way from being able to say it represents some sort of ceiling for rates, but we can always hope this tiny sapling grows into a mighty tree as long as we remember that hope is no basis for a strategy. Today was “nice.” If tomorrow is nice, that would also be “nice.” But it’s a good time to remain skeptical and defensive until the niceness becomes overwhelming.
Source: Mortgage News Daily
Pending home sales failed to add a third month onto the mini rally it staged in June and July. The National Association of Realtors® (NAR) said its Pending Home Sale Index (PHSI) declined 7.1 percent to 71.8 in August and is now down 18.7 percent from its August 2022 level. The PHSI ended a three-month decline in June, rising 0.3 percent followed by a 0.9 percent increase in July. [pendinghomesdata] The PHSI is based on contracts signed during the month to purchase existing single-family houses, condos, and cooperative apartments. It is a leading indicator of those sales which are expected to close over the following 30 to 60 days. NAR will report September’s existing sales on October 19. “Mortgage rates have been rising above 7 percent since August, which has diminished the pool of home buyers,” said Lawrence Yun, NAR chief economist. “Some would-be home buyers are taking a pause and readjusting their expectations about the location and type of home to better fit their budgets.” “It’s clear that increased housing inventory and better interest rates are essential to revive the housing market ,” added Yun. The index in all four of the nation’s major regions declined compared to both July and to the prior August. The Northeast PHSI was down 0.9 percent to 62.6 and was 18.2 percent lower on an annual basis. The index for the Midwest lost 7.0 percent and 19.1 percent compared to the two earlier periods to a reading of 71.3.
Source: Mortgage News Daily
Bonds lost ground modestly overnight. Contrast that to the past few trading sessions that have seen gains in Europe followed by selling in the US. Then at the start of the domestic session, economic data added to the weakness, but not before a quick, paradoxical blip into stronger territory. This was odd indeed, considering it followed another near-200k print in Jobless Claims (arguably a nail in the coffin of any prospective bond rally).
But now as PM hours approach, bonds are back to unchanged levels. Comments from Fed’s Goolsbee have certainly helped as he basically said the Fed doesn’t need to stoke unemployment in order to tame inflation–a very timely thought on a morning with strong labor market data. Fed Funds Futures offer some clues and confirmation as to the impact of the Fed comments.
Source: Mortgage News Daily
Seen on someone’s laptop here in Phoenix: “If Pete Davidson can date a Kardashian, you can be a homeowner.” From a business viewpoint, if you think mortgages are bad, try NFTs. I don’t know what I was thinking, sinking my entire 401(k) into that sector a few years ago. My collection of fake, imaginary art is now worthless!? It’s good to keep things in perspective. If you think rates in the U.S. are too high, try being a lender in Pakistan (22 percent) or Turkey (benchmark rate at 25 percent.) Although buyers in the U.S. don’t have to contend with rates like that, what are the big concerns in the home buying experience? A sizeable portion believe that they will not be able to afford the mortgage payment. Almost as many believe that they won’t be able to save, or don’t have enough, for a down payment. Some think that their home will not be a good investment. And there is a portion who believe that they can’t trust the real estate agent or the lender. LOs certainly have their work cut out for them. (Today’s podcast can be found here and this week’s is sponsored by Built. Built is powering smarter and faster money movement for the entire construction and real estate ecosystem, all while reducing risk. Hear an interview with Fidelity National Financial’s Chuck Cain on the controversy surrounding Attorney Opinion Letters in lieu of title insurance.) Lender and Broker Software, Programs, and Services Let’s face it: We’re all feeling the impacts of rising loan origination costs. What if you could come back from MBA Annual23 with winning strategies to help you optimize your cost management, boost your profitability, and take control of your bottom line by matching you with the right tools and workflows? With Certified Credit, you can! Certified Credit’s suite of Cascade solutions automates your lead generation, prequalification, VOE, and UDM processes to help you reduce origination costs. Plus, when you pair leading automation with milestone ordering, you take your efficiency to a new level, standardizing your workflows and mitigating errors and delays. Ready to learn how you can enhance your cost management and operational efficiency? Grab your spot with Certified Credit at MBA Annual23!
Source: Mortgage News Daily
It’s with no great pleasure (none of any kind, for that matter) that we find ourselves in a position to report, yet again, that mortgage rates have sailed decisively to another new multi-decade high. Today’s installment is fairly unpleasant given that the average lender actually began the day in slightly stronger territory only to be forced to increase rates at least once over the course of the day. As is the case any time rates start lower and are revised higher, the culprit is the underlying bond market. Specifically, bonds started the day in stronger territory but ended up weakening significantly between 10am and 2pm ET. Underlying reasons for that weakness are a matter of debate and confusion. Some point to comments from Fed speakers or a delayed reaction to economic data, but there are good reasons to be skeptical of both explanations. One of the only things that can’t be disproven right now is the sense that the entire bond market has acquiesced to the notion of interest rates being “higher for longer” and simply can’t reach the “higher” destination all in one go. In other words, the market believes the Fed and it sees the value in being cautious ahead of next week’s important economic data. Traders have apparently decided it’s less painful to err on the side of higher rates and be forced to buy more bonds in the future (buying = lower rates, all other things being equal) than to be caught on the wrong side of the “higher for longer” trade yet again.
Source: Mortgage News Daily
