With the 10-year Treasury yield at levels not seen in 52 weeks, the 30-year fixed rate mortgage rose 15 basis points over last Thursday, Freddie Mac said.

Starts of single-family homes declined 9%, the most since August, according to government figures released Thursday.

Peace Deal Rumors Make For Mid-Day Reversal

Bonds started the day in fairly forgettable and slightly weaker fashion after overnight headlines suggested that the disposition of Iran’s nuclear material remains a sticking point. Bonds were flat at weaker levels all morning. Then, just after 1pm, a different headline suggested a “draft agreement” was expected to be announced in a matter of hours. It listed several bullet points, but ironically, nuclear material was not on the list. Nonetheless, the bond market rallied into positive territory rather easily. As much of a head-scratcher as that is (why get excited if the nuclear sticking point remains?), there’s no question about the reaction function with oil prices perfectly matching the bond yield move.

Econ Data / Events

Building Permits (Apr)

1.442M vs 1.39M f’cast, 1.363M prev

Continued Claims (May)/09

1,782K vs 1790K f’cast, 1782K prev

Housing starts number mm (Apr)

1.465M vs 1.41M f’cast, 1.502M prev

Jobless Claims (May)/16

209K vs 210K f’cast, 211K prev

Philly Fed Business Index (May)

-0.4 vs 18 f’cast, 26.7 prev

Philly Fed Prices Paid (May)

47.90 vs — f’cast, 59.30 prev

Market Movement Recap

08:31 AM Weaker overnight as Iran says it’s keeping nuclear material. MBS down a quarter point and 10yr up 3.2bps at 4.62

12:26 PM Fairly flat at modestly weaker levels. MBS down 3 ticks (.09) and 10yr up 1bp at 4.598

01:17 PM Rallying on Iran peace agreement rumors. MBS up 3 ticks (.09) and 10yr down 1.4bps at 4.575

02:29 PM Rally continues on peace deal news. MBS up more than a quarter point and 10yr down 3.2bps at 4.556

02:59 PM most recent newswires pushing back on previous, optimistic news. 10yr back near unchanged levels at 4.585 and MBS up an eighth (after being up more than a quarter point a short while ago. 

The House passed housing legislation that includes a slightly pared-down institutional investor housing ban, as well as a raft of community bank measures.

Delinquencies among recent FHA originations are showing up alongside a notable volume of subordinate liens carried by the borrowers.

The share of sellers dropping their asking price fell in April as buyer demand picked up, though Sun Belt markets — especially in Texas — still saw widespread price cuts.

The real estate investment trust, while reporting a first quarter net loss, benefitted from growth and stable margins in its three mortgage production units.

The co-author of the landmark Dodd-Frank Act and progressive congressional trailblazer Rep. Barney Frank, D-Mass., has died.

Full Reversal And Then Some

Bonds more than made up from Tuesday’s rout with a massive rally on Wednesday. Unlike Tuesday’s move, which was driven by bond-market-specific selling pressure on the part of one account’s massive liquidations, Wednesday’s rally was broad-based and driven by war-related headlines. Specifically, newswires suggested the U.S. and Iran are now very close to agreeing on a plan to end the war. The market isn’t just hearing “wolf!” It’s pretty sure it’s seeing an actual wolf on the horizon. This is important and ongoing proof of concept regarding the prospect of additional improvement in the event speculation becomes reality. Conversely, it’s also a reminder that things can change quickly if the peace narrative deteriorates in coming days.

Market Movement Recap

08:49 AM moderately stronger overnight. MBS up an eighth and 10yr down 2.1bps at 4.646

10:27 AM gaining some ground on Pakistan headlines (potential final draft of peace terms tomorrow). 10yr down 3.7bps at 4.629 and MBS up just over a quarter point.

01:18 PM Near best levels. MBS up 3/8ths and 10yr down 8.8bps at 4.58

02:53 PM MBS up 5/8ths and 10yr down 10bps at 4.567

Wednesday brought some much-needed relief for the mortgage market after rates surged to new 9 month highs of 6.75% yesterday. Whereas that rate spike was decoupled from the prevailing narrative of war-related headlines, today’s recovery was quite the opposite. Newswires came out shortly after 10am ET that suggested the U.S. and Iran are nearing a final draft of a peace agreement. While such news has been prone to correction and revision, the market was nonetheless willing to respond quickly and rather forcefully. Oil prices dropped sharply with Treasury yields in tow. In the bond market, “yield” is another word for “rate.” And because mortgage pricing is directly dictated by mortgage-specific bonds, when yields are falling, mortgage rates will almost always be falling as well. The average lender fully erased yesterday’s rate spike, ultimately making it back below the levels seen on Monday afternoon. Granted, Monday’s levels were still the highest in many months at the time, but we have to start somewhere. At the very least, today’s market movement reiterates the fact that rates will likely make an even better recovery when the war is officially over. [thirtyyearmortgagerates]