Bonds were modestly stronger in the overnight session, and although domestic traders quickly erased the gains in the AM hours, the selling is currently stalling out near unchanged levels.  If this support continues, it will build a case for rates leveling off ahead of Wednesday’s Fed announcement (and dot plot).  Notably, bonds looked prepared to hold overnight gains until the S&P Services PMI came out much stronger than expected at 9:45am. If bonds must be weaker, it’s always better to know why (unlike last week).

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Gross profit returns fell in a range that could easily be erased on renovation, mortgage and tax charges, Attom said.

PHH Mortgage announced it will be using the San Francisco-based technology company’s Mortgage Suite, including Loan Officer Toolkit and Blend Close.

The Federal Housing Administration is giving mortgage companies it works with a break when it comes to certain early-payment defaults in official disaster areas.

The post-pandemic increase in consumers falling behind on their credit card bills seems to be tapering off. “For 2025, we’re seeing a lot of stability in delinquencies,” an industry researcher said.

Businesses across several industries have already started budgeting for expected price increases

Why So Much Selling in Bonds?

Without a doubt, it’s been a frustrating and puzzling week for the bond market.  Everyone knows that bonds have moved consistently higher in yield, but there is very little understanding and agreement about WHY that move has taken place.  Europe had a rough week, but EU bonds didn’t lose as much ground as US bonds, so we can’t really stop there.  We also know that econ data wasn’t to blame (or if it was, traders bought bonds at first and then changed their minds later in the day–not typical behavior, to say the least).  Beyond those considerations, we’re left with guesses and possibilities that are much harder to substantiate and much more esoteric.  These include things like year-end positioning constraints, a move to the sidelines before the Fed announcement, and curve trading driven by one of several factors.  

Econ Data / Events

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Market Movement Recap

09:07 AM Initially slightly stronger overnight, then weaker with Europe.  MBS down 2 ticks (.06) and 10yr up 1.5bps at 4.346

10:01 AM Additional weakness.  MBS down 7 ticks (.22) and 10yr up 3.2bps at 4.362

12:18 PM More of the same.  10yr yields are up 5.8bps at 4.388.  MBS down 10 ticks (.31).

03:10 PM Leveling off near weakest levels with MBS down 11 ticks (.34) and 10yr up 7bps at 4.40

There’s no easy way to say it: it was a bad week for mortgage rates.  Actually, it was a bad week for interest rates in general and mortgage rates typically follow the rest of the rate market.  After hitting the lowest levels in a month and a half last Friday, each of the next 5 days saw a modest to moderate increase in the average lender’s mortgage rates. But why? Rates are tied to the bond market. Movement in bonds dictates what mortgage lenders can offer.  Bonds can move for multiple reasons, but if we could only ever consider one input, it would be the broad category of “economic data.”  That’s what makes this week frustrating.  Economic data arguably didn’t suggest the type of damage we ended up seeing.  Unfortunately, once we move past economic data, rate motivations become much less obvious and much harder to discuss without esoteric bond market jargon. Suffice it to say that there are factors beyond the domestic economy that have traders shifting their bond holdings.  Some of those have to do with end-of-year requirements for financial statements.  Some are more focused on getting into position to react to next week’s Fed rate announcement on Wednesday.  At that point, we’ll either see some reprieve, or an acceleration of the recent momentum.

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