Narrow Trading, Weaker Drift; MBS Live Threads Intro

Narrow Trading, Weaker Drift; MBS Live Threads Intro

Bonds began the day in weaker territory but found a bit on the latest tariff headlines (bad for stocks, good for bonds).  As has been typical of tariff headline reactions, the movement wasn’t big and it didn’t last long.  A ho-hum 5yr Treasury auction paved the way for one last attempt at gains, but bonds gave up in the PM hours with both MBS and Treasuries drifting to their weakest levels of the day.  That said, the range is still narrow and nothing of major consequence transpired today.  In other news, today’s video recap has an introduction to a new MBS Live feature: Threads! 

Econ Data / Events

Durable Goods

0.9 vs -1.0 f’cast, 3.3 prev

Market Movement Recap

09:59 AM Weaker overnight, but flat in early trading.  MBS down 2 ticks (.06) and 10yr up 2.5bps at 4.342

12:54 PM Some mid-day recovery on tariff headlines (probably).  MBS down only 1 tick (0.03) and 10yr up 2.2bps at 4.339

04:09 PM Heading out near weakest levels.  MBS down an eighth and 10yr up 3.1bps at 4.348

Mortgage Rates Hold Steady Near Recent Highs

It depends what one’s definition of “recent” is, but if it involves the past few weeks, mortgage rates were at their highest recent levels both yesterday and today.  2 other days in that window were worse, but only microscopically.  On a positive note, the entirety of the past few weeks has seen rates calmly holding a narrow range at the lowest average level since early October 2024.   If it’s not already clear, today did nothing to change the prevailing trend, even though the underlying bond market suggested rates should move higher.  As we discussed yesterday, bonds can say one thing and mortgage rates can do something else depending on the time of day and the pace of market movement.  Today was just another example as the bond market movement that suggested higher rates happened too late in the day for most lenders to react.  The tacit implication is that rates will be slightly higher tomorrow if the bond market remains in the same territory between now and tomorrow morning. 

Correspondent Product; Pulte’s FHFA Changes and Non-QM Investors; Capital Markets

Anyone who thinks politics doesn’t impact residential lending isn’t, frankly, paying attention. Let’s start with something simple, like… interest rates. Rates, including mortgage rates, are influenced by economic activity, and we can all agree that tariffs figure into that. We’ve all heard the case in favor of tariffs over the last year. But Republicans are well aware of Ronald Regan’s thoughts on tariffs. Economists Paul Krugman and Milton Friedman had their thoughts on tariffs. Let’s hope that the Trump Administration is right! How about Freddie Mac and Fannie Mae? Informal chatter among us capital markets folks have a rise in Agency conversations about buybacks, possibly because of Agency uncertainty or because of them wanting to be “first in line” if things become rough. But wait… there’s more! Yesterday Bill Pulte (the Director of the FHFA, conservator of F&F) posted on X (yes, owned by Elon Musk) that Freddie and Fannie would terminate any SPCPs (Special Purpose Credit Program… think, helping economically disadvantaged groups; more below). But wait… there’s more: see below. (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 Servbank’s JoAnne Gonzalez on how servicers invest in technology and people to drive the best outcomes and results.) Correspondent and Wholesale Loan Programs

Yields Pushing Against 1 Month Highs

The first 3 days of this week have all generally seen yields at the highest levels in a month (or perhaps in “at least 28 days” considering Feb’s day count). While that doesn’t sound like an overly pleasant turn of events for the bond/mortgage market, the reality is far less threatening, for now.  It is true that if today’s session closes at present levels, they will be the weakest since Feb 24th, but it’s also true that those levels aren’t too far from recent lows.  The modal range floor is 4.19% in 10yr yields. We’re just under 4.36% this morning–just gently testing the 4.34% range ceiling. Some technicians would argue that the opening gap from Feb 25th still needs to be filled before we find out what’s next.