Bonds can’t seem to catch a break this week.  Data hasn’t necessarily been unfriendly either with both CPI and PPI hitting forecasts at the core monthly level (not to mention higher-than-expected jobless claims). Despite that, rates have risen every day this week with the biggest sell-offs ironically on the days with the not-unfriendly data.  Friday is effectively data free with only import/export prices (a report that never has an impact) and bonds are selling off once again. 
We have to agree that there are non-data-related reasons for this week’s weakness, but from that point on, the assignment of blame becomes somewhat speculative.  Opinions range from “pre-Fed positioning” to “year-end balance sheet constraints.”  Those are hard to prove, and maybe we don’t need to have an ironclad scapegoat to simply observe this trend is not our friend until further notice. 
That much is obvious, but what’s next?  It’s always a coin flip, more or less, but if you’re looking for hope, here are a few options.  First, yields just filled an opening gap from Monday Nov 25th.  Some technicians think this is the kind of thing that precedes a friendly bounce.

One could also consider even longer term trends where yields have moved from the bottom to the top of a trend channel that has been intact for more than a year now.  Of course, trend channels aren’t permanent, but if we do happen to see rates show some resilience next week, these technical considerations would bolster the case for that rally to have a bit of staying power.

Using homeowner data available on ICE’s servicing platform, the integration can prompt users to use a self-guided appraisal valuation tool.

The distressed loan sales strategy has been in test mode since 2002. A rise in owner-occupant transactions may have made it more compelling.

The average surplus premium to protect property this year was roughly $46,000 in the wealthy enclave and the situation is only likely to worsen as climate change ups the odds of destructive wildfires.

For the fourth month in a row, overall mortgage delinquency rates have increased, with loans 30 days or more late up 0.2 percentage points in September.

Feds allegedly reneged on an agreement with the trade group at the onset of the Biden Administration.

Mediocre Data Has Done Nothing to Help Bonds

Granted, this week’s slate of economic data isn’t on quite the same level as NFP week, but neither have offered any seriously upbeat reports. Today’s PPI and yesterday’s CPI both hit forecasts at the monthly level.  Jobless Claims certainly weren’t bullish for the labor market. Bond traders even jumped on a quick AM rally in response to the 8:30am data (both today and yesterday). But like yesterday, it was over soon after it began and the rest of the day was dominated by steady selling.  We can blame heavy selling in Europe for the timing of today’s reversal, but Treasury traders kept the bad times rolling well after EU markets closed.

Econ Data / Events

Core Producer Prices MM

0.2 vs 0.2 f’cast, 0.3 prev

Core Producer Prices YY

3.4 vs 3.2 f’cast, 3.1 prev

Jobless Claims

242k vs 220k f’cast, 224k prev

Market Movement Recap

09:35 AM Slightly weaker overnight, recovering a bit after data and weakening a bit with EU markets after ECB announcement.  MBS down 1 tick (.03) and 10yr up just under 1bp at 4.292

02:02 PM MBS now down 6 ticks (.19) on the day 10 yr yields are also up to new highs for the day at 4.320%.

03:26 PM Weaker still… MBS down 9 ticks (.28) and 10yr up 4.3bps at 4.327

It’s been a bummer of a week for mortgage rates with modest to moderate increases every day so far.  Adding insult to injury is the fact that there hasn’t been any compelling reason for the increase as far as this week’s new economic data is concerned. Economic data is a constant consideration for rates.  Generally speaking, weaker data = lower rates and vice versa. With that in mind, this week’s rate movement is all the more frustrating because none of the key reports have been “strong.”  In fact, the bond market reacted favorably (i.e. bonds implied lower rates) to several of them in the morning only for traders to take things in the other direction by the end of the day. Today and yesterday are the two best examples of that.  Each day resulted in a decent first round of rate offerings from mortgage lenders followed by a round of negative reprices as the day progressed.  The net effect is a move up to the highest levels in a week for top tier conventional 30yr fixed scenarios.

What? You’re a builder who’s short on nails? Well, bring in some folks from Japan… they don’t necessarily need them. Of the nearly 300 types of nails made in the United States today, most are used in residential housing construction. The average wood frame house uses between 20,000 and 30,000 nails of various types and sizes. (I don’t know what percent of nails used in the United States are made in places like China.) On a side note, Walmart says that 70-80 percent of its merchandise is made in China. But interestingly, Walmart’s stock price is at its all-time highs despite tariff talk. Lender and bank stocks, however, are more complicated. Investors and advisers are anticipating increased consolidation among smaller U.S. banks under President-elect Donald Trump, viewing merging as a way to compete with larger firms. Regulatory scrutiny under President Joe Biden slowed mergers, but the potential for a more business-friendly environment under Trump has already led to deals. And STRATMOR, known in the industry as involved in many deals, reports that lender interest is strong. (Today’s podcast can be found here and this week’s podcasts are sponsored by Bundle, the attorney-prepared legal documents company that is dedicated to the real estate, mortgage, and title industry. Save 20 percent all week with the code “Chrisman.” Hear an interview with Bundle’s Courtney Dec and Carissa Orozco on setting online services technology to serve the speed and expectation of clients.)

This morning’s Producer Price Index (PPI) came in hotter than expected in year-over-year terms (3.4 vs 3.2 at the core level). Traders were mostly able to look past that given that the most recent month was in line with forecasts. Jobless Claims data helped facilitate gains between 8:30am and 9am ET, but shortly thereafter, the European bond market began selling off somewhat aggressively in response to today’s European Central Bank (ECB) announcement and press conference.  The correlation between EU and US yields is clear and it has resulted in US bonds moving back into negative territory. 

There’s some context on Jobless Claims as well.  Despite being the highest level in more than 8 weeks, it’s not necessarily an abnormal seasonal spike.  The following chart shows the non-seasonally adjusted data compared to other years. We’re right in line with 2019 at the moment, and not far off the post-Thanksgiving week spikes of 2022 or 2023.