A federal judge in Maryland ruled against the City of Baltimore’s attempt to block cuts to Consumer Financial Protection Bureau program funding on procedural grounds.

Despite some ups and downs on a small scale, mortgage rates have been sideways in the bigger picture.  That’s a good thing if the latest refi application data is any indication.  Demand is at the highest levels since October as rates have generally been holding near mid-October levels. Today was just another day in that regard.  Bonds (which dictate rates) were slightly weaker overnight (bond weakness implies higher rates). As as often been the case recently, stocks played a role in the rate movement. Prospects for a debt ceiling deal may have contributed to market optimism.  With that, mortgage rates were just a few tenths of a percent higher than yesterday, but to reiterate, not too far from yesterday’s latest levels.

Uneventful Friday, Even if Slightly Weaker

Friday’s trading session was the most uneventful of the week.  It began with moderate losses in the overnight session in concert with stock market gains.  Some traders attributed this to improved odds of avoiding a government shutdown by tonight’s deadline.  The only scheduled economic data was the Consumer Sentiment report which has fallen by the wayside to some extent as the results are increasingly discounted as being clouded by political affiliations of respondents. Nonetheless, the uptick in inflation expectations was notable and worth a bit of extra weakness in bonds at the time.  Even so, bonds remains well within the range set by yesterday’s trading.  The result is an “inside day” in market jargon, which one could either read as “indecisive” or “boring.”  We’d lean toward the latter.

Econ Data / Events

Consumer Sentiment

57.9 vs 63.1 f’cast, 64.7 prev

1yr inflation expectations

up 0.6%

5yr inflation expectations

up 0.6%

Market Movement Recap

09:30 AM Moderately weaker overnight in concert with stock market gains.  MBS down 3 ticks (.09) and 10yr up 3.4bps at 4.303

10:03 AM Some weakness following uptick in consumer inflation expectations.  MBS down 5 ticks (.16) and 10yr up 4.8bps at 4.317

12:27 PM Calm and sideways.  10yr up 2.6bps at 4.296.   MBS down 2 ticks (.06)

03:20 PM Losing some ground in PM hours.  MBS down 5 ticks (.16) and 10yr up 4.3bps at 4.313

04:49 PM Just a hair weaker.  MBS down 6 ticks (.19) and 10yr up 4.8bps and 4.318.

It’s been an on-again, off-again week for bonds and several of their trading motivations.  Economic data has played its part at times, but not in any excessive way.  The same goes for the recently relevant “stock lever” (the tendency for higher stock prices to push bond yields higher and vice versa). It was the latter that was most noticeable in the overnight session with modestly higher stocks and bond yields. 

The most basic assumption is that this has something to do with late headlines yesterday regarding the prospects for averting a government shutdown. Whether or not this is the true motivation is nearly moot for two reasons. First off, the extraordinary measures that have prevented a shutdown thus far technically expire today if we take the government at their word. Perhaps more importantly, non of this week’s movement in bonds has been very consequential.  If anything, it’s a garden variety consolidation after hitting multi-month lows last week.

Time flies. We’re at “pi day” (3.14), two weeks until the end of the quarter, one month before our taxes are due. Tax returns for individuals are private (I think) but those filed by nonprofit organizations are public records. The Mortgage Bankers Association of America taxes, for example, are here. Speaking of which, our MBA has a lot on its plate. Setting up relationships with Scott Turner (HUD) and Bill Pulte (confirmed for FHFA this week) is important since having a say in ending the conservatorship of the GSEs (Fannie Mae and Freddie Mac) matters greatly. (Would they still be government sponsored?) “16 years of hands-on conservatorship by FHFA has created inefficiencies, blunted some of their competitiveness, and led to challenges in retaining and attracting the best talent in the housing finance space.” The MBA has identified four over-arching principles it believes should frame the release of Fannie and Freddie: an explicit backstop via a federal guarantee, the two maintaining a level playing field for lenders of all shapes and sizes, a “Bright Line” between primary and secondary mortgage functions that must be clearly defined and rigorously enforced by FHFA to ensure a stable and competitive market, and, lastly, FHFA regulatory enhancements to regulate the GSEs’ rate of return and market conduct. Go MBA! (Today’s podcast can be found here and this week’s is sponsored by TransUnion. TransUnion offers thousands of B2B solutions designed to address the unique needs of mortgage lenders, especially for their identity-focused, data-driven mortgage insights and solutions. Hear an Interview with Milo’s Josip Rupena on the latest happenings at the intersection of crypto and mortgage lending.)

The average size of purchase applications fell below the $400,000 mark, reflecting first-time home buyer interest, the Mortgage Bankers Association said.

Early moves by the new head of the Department of Housing and Urban Development include blocking activities related to diversity, equity and inclusion.

New York Attorney General Letitia James announced new state legislation to ban unfair and abusive business practices, giving state regulators broader authority to crack down on consumer abuses.

Three Democratic senators joined Republican colleagues to confirm the businessman, who previously voiced his support for easing government regulations.

The good news in the Consumer Price Index report has not carried over to the 10-year Treasury yield and thus mortgage rates, Freddie Mac found.