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Overnight Weakness Gives Way to Modest Gains
Overnight Weakness Gives Way to Modest Gains
In absolute terms, it was a moderately active day for bonds as 10yr yields moved inside a respectable 7bp range (4.37 to 4.30). In day-over-day terms, we’re left with merely modest gains, but no one’s complaining. Early trading raised concerns about a technical break above the 4.34 ceiling. As we discussed yesterday, such breakouts can just as often serve as cues for buyers to get back in the pool, and that appears to have been the case today. Stocks had one of their calmest sessions in recent memory and bonds didn’t exhibit any of the typical correlation. U.S. bond traders simply showed up in line to buy some bonds, and that was that.
Econ Data / Events
Consumer Confidence
92.9 vs 94.0 f’cast, 98.3 prev
lowest reading since July 2022
expectations index 65.2 vs 72.9 prev
Market Movement Recap
09:42 AM Weaker overnight, but stronger after 8:20am CME Open. 10yr down half a bp at 4.337 and MBS up 1 tick (.03)
12:51 PM Bond rally continues. MBS up an eighth and 10yr down 4.2bps at 4.3
03:49 PM Off the best levels, but still stronger. MBS up 2 ticks (.06) and 10yr down 3bps at 4.312
Mortgage Rates Modestly Higher on Average, But Some Lenders Are Lower
One of the key principles of mortgage rate movement has to do with the frequency of mortgage rate changes. Specifically, mortgage lenders prefer to update rates once per day. This is notable because mortgage rates are based on bonds, and bonds are constantly trading. The compromise is that mortgage lenders will indeed change rates more than once a day, in cases where bonds move enough to force their hands. This concept is relevant today because it explains why rates are both higher and lower, depending on the lender in question. Yesterday, bonds were moving in such a way that prompted some lenders to raise rates in the afternoon. Other lenders held steady and simply raised rates this morning instead. Lenders who raised rates yesterday were fairly close to the same levels this morning, and many of them were actually slightly lower. On overage, though, this morning’s rates were higher than yesterday’s. To make matters just a bit more confusing, we’re once again seeing enough market movement for lenders to make mid-day changes today, but this time, it’s in a friendly direction. A small handful of lenders have offered modest improvements, but even if every lender followed suit, yesterday morning’s rates would still be slightly lower. To repeat a phrase from yesterday, yes, this is much ado about nothing. Top tier, conventional 30yr fixed rates are still orbiting 6.75% in a calm, narrow range in the bigger picture.
Customer Experience, Internal Audit, Pre-Approval Tools; CFPB Still Here; FHA, USDA Changes
This week I head to San Diego for MCT Exchange 2025, and my email has been heating up. “Rob, are you hearing about a big jump in lock volume last week?” Yes… it may not be just you. As they say, a rising tide raises all boats. “Rob, are you hearing about an uptick in FHA delinquencies?” Yes, absolutely, and for quite some time. These high margin, low down payment loans are seeing an increase in problems. “Rob, are you hearing that the CFPB is back up and running?” Yes, at least parts of it: regs, monitoring, the complaint function; less so supervision and enforcement. Speaking of which, Mortgage Musings author and attorney Brian Levy hopes someone gets his message in a bottle with his latest Musing doubling as an open letter to CFPB leadership containing many suggestions for mortgage regulatory reform. “Rob, are you hearing that LOs need videos to reach millennial home buyers?” Perhaps… I know that in today’s Mortgages for Millennials, Kristin Messerli and Robbie Chrisman are joined by guest Ralph Remy of National MI: “Trust in financial institutions is plummeting, and YouTube has emerged as the go-to platform for homebuying education.” (Today’s podcast can be found here and this week’s is sponsored by ICE. ICE offers an interconnected digital mortgage ecosystem to help clients improve productivity, reduce costs, and deliver a meaningful customer experience. Today’s has an Interview with TRUE’s Steve Butler on how instant loan intelligence is revolutionizing borrower engagement. Lenders who fail to adopt AI-driven processes risk becoming obsolete.)
Bonds Filling The Gap or Just Tired of Selling?
Bonds came into the domestic session in weaker territory after steady selling in Europe. The resulting yields were ultimately a few bps higher than the nearest technical ceiling in the 10yr (4.34), which is also the lower boundary of a “gap” created by the big overnight rally on February 25th. Technicians could view this movement two ways. On one hand, a break above the technical ceiling could cause concern about additional selling. Conversely, a move back into a gap could be viewed as a cue to buy again. Interestingly enough, bonds began rallying right at the official start of the domestic session. Is this enough to conclude that the “fill the gap” crowd is in charge? Probably not. In a sideways range, the typical pattern involves 1-3 days of gains followed by 1-3 days of weakness. This is still a generally sideways market that’s waiting for more serious motivation.
OCC to explore alternative credit metrics
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Changing US economic data would boost costs for banks
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