While there were only 4 business days instead of the customary 5, it’s been an intensely boring week for mortgage rates.  Tuesday started out right where Friday left off. From there, Thursday brought the only noticeable change with the average lender moving up to the highest levels in just over a week. Friday saw a return to the boring trend with an almost imperceptible improvement, splitting the difference between yesterday’s highs and Tue/Wed lows.   The day began with rates almost perfectly in line with Thursday’s, but a favorable reception to today’s economic data fueled an improvement in the bond market. This allowed a number of mortgage lenders to make positive adjustments in today’s rate offerings, modest though they may be. Rates (and the underlying bond market) have been relatively starved for actionable economic data this week.  That will begin to change as next week brings a more active calendar.  It continues to the case that rates will have a hard time improving in any major way unless the data shows a clear contraction in growth and continued progress on inflation.

Modest Gains Make For an Uneventful Week

If bonds had continued to sell off today, it would have made the week slightly more interesting, but even then, we would still be well under the high yields seen last week.  As it stands, the combination of this morning’s economic data and an undetermined source of inspiration a short while later left bonds in modestly stronger territory, thus making for a very flat week in the bigger picture.  This is neither bad nor good, and also not a huge surprise given the very light data calendar.  There are bigger-ticket events in the week ahead, including a Fed announcement (just tuning in for the press conference), GDP (1st look at Q4), and PCE inflation. 

Econ Data / Events

S&P Services PMI

52.8 vs 56.5 f’cast, 56.8 prev
prices and employment moved higher

Consumer Sentiment

71.1 vs 73.2 f’cast, 74.0 prev
1yr inflation: unchanged
5yr inflation: down 0.1

Market Movement Recap

10:02 AM Modestly stronger at the open, but slightly weaker after data.  MBS down 1 tick (.03) and 10yr up half a bp at 4.647

10:48 AM Bouncing back now.  MBS up 3 ticks (.09) and 10yr down 1.3bps at 4.629

01:51 PM Off the best levels, but still up an eighth in MBS and down 1.3bps in 10yr.

04:26 PM Moving back toward stronger levels into the close.  MBS up 5 ticks (.16) and 10yr down 2.4bps at 4.618

Due to the incredibly light calendar of economic data this week, this morning’s combination of S&P PMI and Consumer Sentiment added up to the most consequential morning of market movers for bonds.  There has indeed been a bit of a reaction, but it’s playing out well within the recent range.
There was 2-way volatility following the PMI data due to stronger internals offsetting a weaker headline.  15 minutes later, calm inflation expectations and modestly lower Consumer Sentiment offered no objections to a modest rally.  Ironically, the highest volume move occurred at 10:50am ET without any clear connection to data or events (not to say there is no connection, but not one that we’ve seen).

With that, the day is essentially over unless something interesting hits the news and grabs the market’s attention (always possible, but never a given).

The Mortgage Bankers Association’s (MBA) weekly mortgage application survey showed a modest decrease in refinance applications and an even more modest increase in purchase applications. At these levels of movement, it’s just as fair to say that applications generally held steady. That’s a good thing for purchases considering last week was already at the highest levels in nearly a year, but again, there’s no real change from the previous week. The more we zoom out, the more sobering the context becomes. The counterpoint is that this context is also optimistic because short of a major meltdown in the housing/mortgage market, there’s really nowhere to go but up. Refinance demand will always be more closely tied to interest rates.  As such, it’s no surprise to see low levels persist as rates remain elevated compared to the lows seen several months ago. On a positive note, present levels are still about 30% higher than the late 2023 lows.  The big picture view of refi apps reminds us of a different time, when each new long-term low in rates meant that most mortgage holders could benefit from a refi.   Other highlights from this week’s data:
Refis accounted for 40.4% of the total, down from 42.7 last time
Adjustable rate mortgages accounted for 5.5% of the total
FHA loan were 16.5% of the total, down from 16.9%
VA loans were 14.6% of the total, down from 15.7%

With the growth in the use of government products, further increases in late payment rates over the coming year are likely, ICE Mortgage Technology said.

Newfi initially established its partnership with residential transition loan provider Dunmor in June 2024 to help it open up funding capacity and establish its presence in the lending segment.

A Government Accountability Office report Thursday said emergency actions taken by federal regulators in the wake of Silicon Valley Bank’s failure were justified and appear to have stemmed further disruption, but noted those actions could contribute to moral hazard.

Banks’ AI deployments will now be supervised by states and the companies themselves, experts say.

As forbearance starts to rise due to the fires, servicers that have just gotten a respite from hurricanes recoveries will have to gear up again.

Bonds Feeling Defensive Despite Trump’s Demands For Lower Rates

Bonds lost ground this morning despite slightly higher Jobless Claims. There are no obvious cases for causality apart from markets generally bracing for the impact of impending fiscal changes.  Some feel that tariffs will increase inflation.  Others feel that separate policies will increase growth (or decrease revenue). None of the above is good for rates.  Notably, Trump said he would “demand” lower interest rates in his Davos speech today and 2yr Treasury yields actually dropped enough to notice, but not by enough to suggest the market is reading much into it. 

Econ Data / Events

Jobless Claims

223k vs 220k f’cast, 217k prev

Continued Claims

1899k vs 1860k f’cast, 1853k prev

Market Movement Recap

08:31 AM Slightly weaker overnight and no major change after data.  MBS down an eighth and 10yr up 2.3bps at 4.634

01:52 PM Additional weakness into 11am hour but sideways since then.  MBS down 5 ticks (.16) and 10yr up 3.7bps at 4.469

04:08 PM Still sideways after AM weakness.  MBS down 6 ticks (.19) and 10yr up 3.3bps at 4.645