The bonds that underly mortgage rates were only slightly stronger today, but that’s never a bad thing when they closed near the best levels in a year the previous day. Additionally, those bonds improved by the end of the day yesterday, meaning that mortgage lenders were going into today with a bit of a cushion. When lenders set rates, they are basically looking at a constantly-moving bond market and locking in rates that will be in effect for the rest of the day.  Mid-day changes only happen if bonds make a big enough move and yesterday’s wasn’t big enough for most lenders. Yesterday’s cushion combined with today’s modest additional improvement for fairly decent drop in the average top tier 30yr fixed rate.  We’re also now in the zone of rates where movement happens more quickly due to the underlying architecture of the mortgage bond market.  In not so many words, this causes rates to accelerate toward levels that end in 0.125 or .625 for reasons that are too esoteric to dig into today (if you want to nerd out, here you go: Why Mortgage Rates Move in Jumps Instead of Straight Lines). Some lenders are offering their lowest rates in over a year, and some in over 3 years.  The average lender is right in line with 1-year lows and close enough to 3-year lows.

“What do Costco and Las Vegas have in common? You go to buy a gallon of milk, and it costs you $285.” There isn’t a lot of autumn foliage here in Las Vegas, but if you’d like a map of the fall colors, here you go. I’ve received a few comments about how the industry is changing, and in curious ways. There is some creative thinking out there. Along those lines, I received this note. “Rob, have you heard of a title company franchise where LOs and brokers keep title fees, and “own the revenue stream yourself”?” Yes, I think that you’re talking about Proliant Settlement Systems. Does it mean that you could have real estate agents, loan officers, and title officers all working for one company? I don’t know… ask your attorney. Every lender has an attorney these days, right? And innovation is out there. UWM and Bilt announced a strategic partnership whereby UWM mortgage customers can “earn valuable Bilt Points with each on-time payment while accessing exclusive Neighborhood Benefits™, creating an entirely new value proposition for both homeowners and the independent mortgage brokers who serve them:” here. (Today’s podcast can be found here and this week’s are sponsored by nCino, makers of the nCino Mortgage Suite for the modern mortgage lender. nCino Mortgage Suite’s three core products nCino Mortgage, nCino Incentive Compensation, and nCino Mortgage Analytics, unite the people, systems, and stages of the mortgage process into a seamless end-to-end solution embedded with data-driven insights and intelligent automation. Hear an interview with Secure Insight’s Andrew Liput and Halcyon’s Kirk Donaldson on their integrated solution that combines borrower identity, income, and settlement agent verification into a single secure workflow, enhancing mortgage fraud prevention and compliance.)

On the one hand, there’s not much going on for the bond market these days.  The jobs report is a flat-out requirement in terms of informing major changes in momentum. On the other hand, there are a few concerns in the background that have been helping the general uncertainty resolve in favor of buyers. One of last week’s contenders was regional bank losses.  An ongoing consideration is the level of reserves on the Fed balance sheet (not a huge consideration, and mostly baked-in, but probably modestly positive for bonds when the Fed stops letting reserves go lower).

Then there’s oil.  Oil should never be mistaken as a primary indicator for bonds. It is infinitely better described as logically correlating due to global economic momentum. But there’s no denying oil’s role in inflation, and that’s yet another small nudge in favor of better bond buying–or at least it can be.

The state court seemed open to a narrower view of the legal applicability to loans predating the statute than of broad constitutional challenges to it.

In dollar terms, the amounts consumers had to come up with increased by $500 on a consecutive quarter basis, in contrast to a $100 drop the year before.

The rollout comes as the company looks to build out offerings for originators, launching after PHH returned to the proprietary reverse-mortgage arena this year.

Six trade groups warned the administration layoffs and funding freezes could dampen lending, threatening the administration’s goal of economic growth.

A failure at an Amazon Web Services data center in Virginia caused widespread outages, hitting services at several banks and fintechs.

Strange Combo of Excitement and Boredom

Boring stuff first: there was no significant data, news, volume, or volatility today. Bonds gained modest ground early and then held mostly sideways through the 3pm CME close. In that sense, it was just like most other days during the government shutdown (and quite a few even before the shutdown). The excitement is entirely due to outright levels. It was the second best close for 10yr yields in over a year and the 2nd best for 2yr yields in over 3 years (a reflection of the rate cut outlook). 

Market Movement Recap

10:24 AM Slightly weaker overnight, but now stronger after 8:20am rally.  10yr down 1.6bps at 3.994 and MBS up 3 ticks (.09)

01:58 PM Flat all day so far.  MBS up 3 ticks (.09) and 10yr down 1.9bps at 3.99

03:58 PM Heading out near best levels.  MBS up an eighth and 10yr down 2.7bps at 3.981

Mortgage rates ended last week at the lowest levels in just over a month. It was the 3rd best day in over a year and the 24th best day in over 3 years. The other 23 days weren’t too much lower either. The only difference today is a microscopic improvement that makes it the 2nd best day in over a year. In other words, we’re hanging out near 3 year lows with minimal volatility. In order to see sharper, more sustained momentum, we’d likely need the government shutdown to end. That would allow the most consequential economic reports (like the jobs report) to be released. It would also allow data collection to resume for future jobs reports. Between now and then, there is other data to guide the rate market, but it’s just not as heavy hitting. This week is particularly light in that regard, but there’s one exception. The BLS received an exception to compile September’s CPI inflation data, to be released this Friday. It’s not quite on par with the jobs report, but it can certainly get rates moving (for better or worse, depending on the details).