Yesterday was notable for being the first day in more than a week to offer any excitement for rates.  More notably, that excitement was the good kind.  The average lender moved back under 7.00% for top tier conventional 30yr fixed rates for the first time since December 17th, even if only by a scant 0.01%.   Today’s rates are effectively right in line with that, but officially 0.01% higher, and not for any interesting reasons.  The only major economic data consisted of weekly Jobless Claims–not to be confused with tomorrow’s immensely more important jobs report–coming in fairly close to forecasts. Tomorrow’s jobs report will be released at 8:30am ET, which is well before mortgage lenders update their rate offerings for the day.  As such, rates could once again see more meaningful movement as they did on Wednesday.  As always, major economic data doesn’t carry any connotation as to the direction of the impending movement.  Markets have already adjusted for their best guess on the results.  If the report is much stronger, rates would likely jump.  If it’s much weaker, rates would likely move back below 7%.

“Nothing says, ‘I mean business’ than using a shopping cart at the liquor store.” We’re already 10 percent through with 2025, and residential lenders and vendors don’t know whether “meaning business” is spending their time watching Washington DC or trying to help their borrowers. Or both. Trump fired CFPB head Rohit Chopra and appointed Treasury Secretary Scott Bessent as Interim Head. Certainly there is this school of thought: Consumer ‘watchdog’ hounded US businesses, let’s shut it down. Bessent’s first action was to suspend everything the CFPB is doing. The agency suspended the effective dates for all rules that have yet to go into effect, pause all litigation (they are only allowed to file for continuances), and stop rule-making. They also were told to cease public comment. Meanwhile, yesterday it seemed like every trade group congratulated Scott Turner on his confirmation to serve as HUD Secretary. Ginnie Mae, for example, into which most FHA and VA loans are placed, is a government-owned corporation of the United States Federal Government within the Department of Housing and Urban Development. (Today’s podcast can be found here and this week’s is sponsored by Optimal Blue. OB bridges the primary and secondary mortgage markets to deliver the industry’s only end-to-end capital markets platform, helping lenders maximize profitability and operate efficiently so they can help American borrowers achieve the dream of homeownership. Hear an interview with Experian’s Joy Mina and David Fay on reducing pipeline fallout and improving loan pull-through rate.)

Coming off yesterday’s solid rally, the bond market underwent a modest correction in the overnight session.  Most of the gains remain intact, but the bounce makes a case for a short term yield floor at 4.415–a level that saw multiple bounces yesterday and another one just this morning after the jobless claims data.  With no other big ticket data on tap, it wouldn’t be a surprise for bonds to opt for “consolidation” ahead of tomorrow’s big jobs report.  On that note, keep in mind that despite the recent shift in focus in favor of inflation data, that the jobs report still matters and will always be a big ticket market mover for bonds.  The increased focus on CPI simply means that it is once again competing in roughly the same league as NFP as opposed to being a competent understudy. 

Treasury Secretary Scott Bessent said the Trump administration’s focus with regard to bringing down borrowing costs is 10-year Treasury yields, rather than the Federal Reserve’s benchmark short-term interest rate.

With the Federal Reserve eyeing changes to its annual examination of large bank resilience, this year’s test could be the last of its kind.

Mortgage companies under scrutiny could see a reprieve, while the status of functions like behind-the-scenes guidance inquiries is uncertain, experts say.

Completed foreclosure auctions should be 8% lower this year, but if home value and unemployment expectations change, all bets are off, Auction.com said.

Mortgage and housing industry groups cheered the U.S. Senate vote, which found only two Democrats crossing over to support Scott Turner’s nomination.

Nice Win For Bonds With Help From Data

There are plenty of moving pieces at the moment when it comes to assigning credit for various ups and downs in the bond market on any given day.  Many of those can only be guessed at–or at the very least, debated–due to the uncertain eventual impact from economic policies that have yet to be fully understood or implemented.  For example, some would say that bonds benefited from yesterday’s news that Trump intends to take over Gaza, but others would say it was a non-event.  One thing all bond watchers can agree on is that pedigree reports like ISM Services are highly likely to do logical things to bonds when they come in noticeably weaker or stronger than expected.  Today’s ISM data was weaker, including the price component.  As such, it’s no surprise to see an extension of the overnight rally just after the data, with the resulting trading levels lasting for most of the day.

Econ Data / Events

ADP Employment

183k vs 150k f’cast, 122k prev

ISM Services

52.8 vs 54.3 f’cast, 54.0 prev

ISM Prices

60.4 vs 64.4 prev

Market Movement Recap

08:27 AM MBS up just over an eighth of a point and 10yr down 5bps at 4.46

10:45 AM Gains continue after ISM data.  MBS up 9 ticks (.28) and 10yr down 8bps at 4.425.

01:08 PM Calmly holding best levels of the day.  MBS up 3/8ths and 10yr down almost 9 bps at 4.419

03:07 PM Down just over an eighth from highs, but still much stronger with MBS up 10 ticks (.31) on the day.  10yr yields down 8.4bps at 4.421

There are two main styles of measurement when it comes to keeping track of mortgage rates: daily and weekly.  Sometimes, the differences in methodologies mean that two reputable sources can convey seemingly incongruent conclusions.  Other times, both the granular and general data agree.  This is one of those times. Whether we’re looking at MND’s daily averages or MBA’s weekly survey, mortgage rates hit their lowest levels in 6 weeks by the end of last week.  The drop wasn’t immense, but based on today’s release of MBA application data, it was enough for a small bump in refinance demand.  As is constantly the case over the past several months, the scope of the mid-2024 spike in application activity is more easily understood with the benefit of additional historical context. Purchase applications are never as sensitive to rates over short time horizons.  In fact, they moved down a bit last week, but the counterpoint is that the purchase index has been holding near recent highs. Here too, broader context changes the takeaway. Other details from the report:
Refinances accounted for 39% of the total vs 37.1% last time
FHA loans accounted for 16.2%, down a bit from 16.7%
VA loans accounted for 13.3% vs 13.2%
MBA recorded 30yr fixed rates at 6.97 for the week with 0.64 discount points
Jumbo rates were 7.01 with 0.48 discount points