Of all of the motivations in all the markets, this one had to walk into ours.  Or perhaps it rolled in on tank tracks.  Just over an hour ago, South Korea’s president declared martial law.  If you don’t follow Korean politics, yes, this is a head scratcher.  Upon verifying the authenticity of the headlines, rather than scratch their heads, investors simply bought bonds in a classic, modest safe haven rally.  This has been the dominant theme so far this morning, turning modest overnight losses to modest early morning gains.  The forthcoming JOLTS data could change or accelerate the move.

A longer term chart emphasizes the small scale nature of today’s move.  The big gains happened as the beginning of last week and little has changed since then.

Redfin data supports findings from this summer when a significant share of buyers said they would move on purchases only after the election.

Federal Reserve Gov. Christopher Waller said the central bank’s last framework review was too focused on the post-global financial crisis period and difficult to explain.

Listing the changes already made to its business model in his first 90 days, CEO Ryan Marshall said Voxtur could be EBITDA positive if trends hold in 2025.

Real estate investment trust United Development Funding IV is facing a Dec. 10 showdown with NexPoint and the $181 million deal could be a lifeline for management.

Federal Reserve Gov. Christopher Waller, a Trump appointee, said that while recent inflation readings are concerning, monetary policy would remain restrictive even if the central bank cuts interest rates by another quarter-point this month.

I recall Zillow doing a study on the color of the front door impacting sales price. What does $22.5 million get you in Charleston, SC, especially if the place is owned by Trump’s nominee for the Secretary of Treasury? “Scott Bessent and his husband bought the historic mansion in 2016 for $6.5 million. They performed a major renovation on the three-story pink home before finally moving in at the end of 2019. The seven-bedroom, eight-bathroom home has four bars, a pool, spa, formal garden and a three-bedroom carriage house.” Bessent listed the place for $22.5 million, which would set the record for the most expensive home sale in Charleston history.” Meanwhile, lenders deal with the day-to-day of helping ordinary people finance their homes, and tomorrow’s Advisory Angle featuring the STRATMOR Group, Senior Advisor Sue Woodard and Principals Jennifer Smith and Kris van Beever explore the latest AI innovations, challenges, and opportunities transforming the future of home financing. (Today’s podcast can be found here and Richey May is sponsoring this week’s. Richey May’s consulting, cybersecurity, business intelligence, and automation services are designed by mortgage experts to help you continue to drive growth and increase profitability. Hear an interview with Rate’s Shant Banosian on what he does that has helped to make him the #1 originator in America for six years running.) Lender and Broker Software, Services, and Products “Sleigh your DMI Subservicer Review with MQMR this winter and make your annual subservicer review seamless and stress-free! Through our Better Together partnership with DMI, we’re here to help you save time, reduce costs, and step into the new year with confidence. MQMR’s comprehensive audit and report include a Subservicing Compliance Audit, compliance and regulatory oversight, and in-depth reviews of compliance and QC documents, servicing technologies, loan file servicing processes, financial condition, call center operations, consumer complaints, and vendor management. For those seeking additional assurance, optional Loan Level Testing is available. By partnering with MQMR, you’ll receive expert guidance and detailed insights to ensure compliance and efficiency throughout your servicing operations. Plus, ask us how you can save $500! Don’t let the winter rush delay your subservicer review: contact MQMR today and let us sleigh your compliance challenges with ease and expertise.”

Mortgage rates remain elevated relative to the levels seen in September and early October, but they’ve definitely moved down a bit from their recent highs.  Thanksgiving week saw the lowest daily average rate in exactly a month, but there’s never a guarantee the rate market will look the same on the following week.  Thankfully, it’s almost perfectly unchanged this time around. The average lender is still able to offer top tier conventional 30yr fixed rates just under 7% for the 4th straight day.  There were no major sources of inspiration today, but that will change as the week progresses.  Friday’s jobs report is especially significant. The same report has had the biggest impact of any economic report on multiple occasions in the past few months.

Bonds Hold Vast Majority of Last Week’s Gains

The most significant thing that happened as the market returned to the office from Thanksgiving weekend is that bonds were able to hold a vasty majority of last week’s gains.  That wasn’t immediately apparent if you were focusing on day-over-day losses, but consider that Friday afternoon saw a quick little rally that made for artificially strong closing levels. Any way you slice it, today’s yields remained roughly 20bps lower than those at the end of the week before last. This is as strong of a showing as we could have hoped for in the absence of any bond-friendly economic data.  The rest of the week is most likely to flow logically from the incoming data. As for today itself, it was mostly uneventful with “new month” and repositioning trades accounting for a mid day recovery from early weakness. 

Econ Data / Events

GDP

2.8 vs 2.8 f’cast

Jobless Claims

213k vs 216k f’cast

Continued Claims

1.907m vs 1.910m f’cast

Core PCE Q/Q 

2.1 vs 2.2 f’cast, 2.8 prev

Core PCE M/M

0.3 vs  0.3 f’cast, 0.3 prev

Core PCE Y/Y

2.8 vs 2.8 f’cast, 2.7 prev

Market Movement Recap

09:18 AM Giving back some of Friday’s ephemeral gains. MBS down 10 ticks (.31) and 10yr up 5bps at 4.221. 

12:16 PM decent gains heading into mid-day.  No obvious motivations apart from geopolitical tensions flaring again.  MBS down 5 ticks (.16) and 10yr up 1.1bps at 4.182 

03:52 PM Small friendly bump after Fed’s Waller’s comments.  MBS down an eighth and 10yr up 1.2bps at 4.183

It can be a bit tricky to understand the roll of various forms of positioning when it comes to otherwise inexplicable movement in the bond market.  It’s also a fairly vague term that can refer to several different things. These include month-end trading, new-month trading, position squaring and short covering, to name the usual suspects. The effects of position-driven trading are amplified by the low volume and light liquidity of a major holiday weekend, and all of the above are playing a role in this morning’s weakness.  In a nutshell, there was never any genuine strength after last Friday’s opening bell.  We actually specifically entertained the possibility of short-covering driving those gains.  This morning, we’re simply seeing those short-positions being re-entered.