Mortgage Rates Near Highest Levels Since February

Mortgage rates moved up somewhat abruptly today as the bond market lost more ground over the weekend.  Rates are driven primarily by bonds, but mortgage lenders tend to only update rates once per day unless the bond market is moving very quickly. With that in mind, bonds were losing ground on Friday afternoon, but not quickly enough or early enough for a majority of lenders to adjust pricing.  As such, lenders already had some catching up to do regardless of today’s bond market weakness.  The combination of the two factors (the “catch-up” and the new weakness) caused today’s spike to be bigger than average. That said, there weren’t any compelling news headlines or economic reports driving the weakness.  It would be better thought of as a hangover from Friday’s jobs report. As the week progresses, there will certainly be at least one major economic report with a proven track record of causing big reactions in rates: the Consumer Price Index (CPI) on Wednesday morning.  With the average lender already near the highest levels since February, a bad reaction to CPI could easily launch rates back to levels not seen since November.  On the other hand, if CPI manages to come in much lower than expected, rates would almost certainly drop.
Source: Mortgage News Daily

Weaker Start, Quiet Monday, Auctions and CPI Ahead

Bonds began the new week with follow-through selling overseas.  Losses were steady and linear in both Asia and Europe.  It’s tempting to chalk up some of the weakness to a big beat in German industrial production data, but Treasury yields were already up to 4.44% by the time the data came out.  The first order of business for U.S. bond traders was to push back in a friendlier direction at 8am, but 10yr yields weren’t able to make it back into Friday’s range.  There are no major econ reports or scheduled events today.  The auction cycle begins tomorrow, but that will be a small supporting actor compared to Wednesday’s CPI.

Despite the recent losses in longer term bonds, the volatility has had little impact on Fed rate expectations (which experienced most of their recent spike in early February.

Since then, a June hike has only seen slim odds and the past 5 weeks have merely been a modest adjustment that makes those odds slightly slimmer.
Source: Mortgage News Daily

Non-QM, Seconds, Warehouse, Efficiency Products; Primer on CRAs, Bureaus, and Data Analytics

“A fine is a tax for doing wrong. A tax is a fine for doing well.” April 15th is in a week, the traditional date when taxes are due. Time flies. Do you realize that we have seven more months until the election? Seven more months of headlines and gaffes, posturing, missteps, and election trivia (like no Republican has been elected to the White House by a majority of Americans since 1988). I’m glad residential lending continues to motor along, albeit at a very moderate pace. Politics can determine the regulatory environment, and this Wednesday’s L1 “Mortgage Matters: The Weekly Roundup at 11AM PT has Kathy Kraninger, former director of the CFPB from 2018 to 2021, now CEO of the Florida Bankers Association. (Found here after 8:30AM ET, this week’s podcasts are sponsored by PHH Mortgage. From subservicing to correspondent lending, MSR/co-issue transactions, portfolio retention, reverse mortgages, and commercial servicing, PHH has solutions for the entire mortgage lifecycle. Hear an interview with Figure Technology Solutions Jackie Frommer on disrupting the industry by leveraging proprietary technology and a deep partnership network.) Lender and Broker Products, Software, and Services A few hours from now, for the first time in nearly seven years, a total solar eclipse will cross the continental United States. Though the time between eclipses varies (it’ll be 2044 before the next one visits the contiguous 48 states) science assures us the choreography of our sun and moon is both cyclical and predictable. If only mortgage interest rates were as reliable! This week on Dark Matter Technologies’ ‘The Spotlight’ podcast, The Mortgage Collaborative President Melissa Langdale shares highlights from her co-op’s recent conference, including ways lenders are leveraging technology to make their processes and workforces more adaptable to our cyclical (but often unpredictable) market. Take 20 minutes and listen to the episode today!
Source: Mortgage News Daily

Bond Market Resilience Suggests More Focus on CPI

Bond Market Resilience Suggests More Focus on CPI

Up until the 3pm CME close, the bond market was having a surprisingly resilient day relative to the market moving data.  When NFP beats forecasts by 100k (today: 303k vs 200k f’cast), we tend to see big losses.  It was no surprise to see losses, but possibly surprising to see bonds almost back to pre-NFP levels 2 hours later.  Even after the 3pm sell-off, MBS are still in line with yesterday morning’s levels.  That’s better than we’d expect, based on the data and one of the only conclusions is that the market is more anxious to see next week’s CPI on Wednesday.

Econ Data / Events

Nonfarm Payrolls

303k vs 200k f’cast, 270k prev

Unemployment Rate

3.8 vs 3.9 f’cast, 3.9 prev

Earnings

0.3 vs 0.3 f’cast, 0.2 prev (revised up 0.1)

Market Movement Recap

09:36 AM Pretty stable after initial losses.  MBS down 7 ticks (.23) and 10yr up 6.5bps at 4.377.

10:55 AM Decent recovery, but it’s not continuing for now.  MBS down only 5 ticks (.16).  10yr up 5.5bps at 4.369 (briefly made it down to 4.337.

02:28 PM Fairly flat in the PM.  MBS down 6 ticks (.19).  10yr up 6bps at 4.372.

03:17 PM Weakness at 3pm CME close.  MBS down 10 ticks (.31) and 10yr up almost 8bps at 4.391.
Source: Mortgage News Daily

Mortgage Rates Surprisingly Steady Despite Strong Jobs Report

Data dependent… That’s a phrase that is all too prevalent in financial markets and among members of the Federal Reserve.  It refers to the fact that economic data will guide the future path of interest rate decisions.   While rates always depend on data, the data outlook isn’t always as uncertain as it has been in the past few years.  At times, we’ve been waiting for inflation and job growth to stop surging.  At other times, we’ve been waiting for them to confirm a move in the other direction.  Either way, there are a few reports that financial markets watch more closely than others and today’s jobs report is one of the best examples. When job growth is higher than expected, the default reaction is for rates to move higher.  The bigger the “beat” (which refers to the actual job count versus the median forecast among multiple economists), the bigger the rate jump tends to be, on average.  With that in mind, today’s payroll count of 303k versus a median forecast of 200k was a big beat!   It was no surprise to see bonds lose ground and rates move higher, but the size of today’s rate increase is much more curious.  The average lender was only modestly higher in rate.  It’s curious, but it may not be incredibly surprising.  Again, it’s all about the data, and although Friday’s jobs report is definitely one of the two most important reports on any given month, next week’s Consumer Price Index (CPI) is bigger.  Today’s resilience could have a lot to do with the market waiting to see those results next Wednesday.
Source: Mortgage News Daily

CRM Product; STRATMOR CD Workshop; FHFA on Lock-In Effect; Training and Webinars

I head to Central Texas today (A53 on Southwest; something about maybe seeing an eclipse); statewide Texas home ownership rate is about 64 percent. This is a shade lower than the 66 percent nationwide. (Home ownership & operational challenges facing lenders are a couple of the topics Mike Metz with Arizona’s V.I.P. Mortgage will discuss today at 2PM CT.) And a huge percentage of those homeowners have low fixed rates. People can be “locked-in” or constrained in their ability to make appropriate financial changes, such as being unable to move homes or sell assets due to tax burdens. In the U.S., nearly all 50 million active mortgages have fixed rates, and most have interest rates far below prevailing market rates, creating a disincentive to sell. These frictions, whether institutional, legislative, personal, or market-driven, are a real problem. The FHFA, Fannie & Freddie’s conservator, has a research piece on this since residential real estate exemplifies this challenge with its physical immobility, high transaction costs, and concentrated wealth. (Found here, this week’s podcasts are sponsored by Loan Vision. With Loan Vision, the mortgage banking industry’s premier mortgage accounting solution, you can take your accounting department from “cost center” to “revenue generator,” operating more efficiently and profitably. Hear an interview with HireAHelper’s Miranda Marquit on a new study that shows that as Millennials age, they’re moving less than ever.) Customer Relationship Management
Source: Mortgage News Daily

Unsurprising Weakness After Surprisingly Strong NFP, But Relatively Well Contained

The jobs number came in at 303k this morning versus a median forecast of 200k.  Previous month revisions added a minimal 22k to the 3 month total and unemployment ticked down to 3.8% from 3.9% last month.  Numbers like this demand a sacrifice from the bond market, and the bond market quickly acquiesced.  That said, if we were forced to guess at the size of the sacrifice, it would probably be bigger than the one we’re actually seeing so far today.  In fact, bonds were almost back to pre-NFP levels by 10:30am and MBS have consistently traded a bit higher than yesterday’s opening levels.  Bottom line: yes we’re weaker, but it could be a lot worse.
Source: Mortgage News Daily

Mysterious Afternoon Gains Bring Yields Back Into The Range Just Before Jobs Report

Mysterious Afternoon Gains Bring Yields Back Into The Range Just Before Jobs Report

It was a surprisingly and mysteriously decent day for the bond market (and even more decent for mortgage rates).  Unlike other days this week, overnight and early morning weakness was minimal.  Gains began ramping up right after the Jobless Claims data.  The direction of the move is no mystery, considering claims came in at 221k vs 214k, but the pace of the move is harder to explain.  Claims don’t typically have as noticeable an impact.  No matter… yields drifted sideways to slightly higher into 2pm and everything seemed to make sense until another sharp little rally over the following 2 hours.  A big stock sell-off was clearly involved and perhaps some buzz surrounding geopolitical risks.  All told, it was enough to get yields back into the range that was broken on Monday (4.32% key level in 10yr) right before the jobs report flips a coin on another big breakout.  Of course if the coin lands on the other side, rates are more likely to take a friendly lead-off heading into next week’s CPI.

Econ Data / Events

Jobless Claims

221k vs 214k f’cast, 212k prev

Continued Claims

1791k vs 1810k prev

Market Movement Recap

09:40 AM Sideways to slightly weaker overnight. Stronger after data.  MBS up an eighth.  10yr down 3.2bps at 4.318

01:26 PM Off the best levels with MBS up only 1 tick (0.03).  10yr 0.4bps higher at 4.354.

03:40 PM Flight to safety surge in the PM with 10s down 4bps to the lows of the day at 4.31.  MBS up an eighth.
Source: Mortgage News Daily

Nice Move Lower in Mortgage Rates Ahead, But Tomorrow is a New Day

Mortgage rates may have been able to claim some resilience over the past few days, but it hasn’t been a great week in general.  The average lender jumped quickly over 7% for a top tier conventional 30yr fixed rate on Monday.  The next two days were much less interesting. Now today, the not-so-great week is showing some signs of promise.  Without much by way of provocation or justification, rates dipped just a hair under 7%.  The nuts and bolts explanation is that the bond market improved this morning following a somewhat weaker reading in Jobless Claims, but other factors relating to timing and recently defensive pricing strategies among lenders help flesh out the story. More importantly, everything that has happened up until today is of secondary importance to what’s about to happen when it comes to interest rate volatility, or at least to the POTENTIAL for volatility.  That’s because tomorrow morning brings the Employment Situation, otherwise known as “the jobs report.”  Along with the Consumer Price Index (CPI), this is one of two reports with vastly more power to cause drama for rates than any other report. The jobs report will be released at 8:30am tomorrow morning.  There is no way to know if it will be good or bad for rates ahead of time–only that it can do either of those things in grand fashion.  That said, it occasionally threads the needle without much fanfare.  If that were to happen, it would place even more focus on the next CPI report which happens to be coming out next week.  
Source: Mortgage News Daily

Light Data Day Leaves Focus on Friday's Jobs Report

Thursday is shaping up to be a calmer and less eventful trading day than the two most recent examples.  It’s similar in the sense that there was some weakness to overcome this morning, but pleasantly different in the sense that the weakness was overcome very quickly.  The morning’s economic data played some role in the resilience with both Challenger Job Cuts and Jobless Claims conveying some incremental labor market weakness.  With no other scheduled data today and no fireworks expected from the afternoon’s Fed speakers, the focus is decidedly shifting to Friday morning’s jobs report.
Source: Mortgage News Daily