President Biden had issued a rule in 2024 requiring newly constructed homes to abide by an energy mandate to be eligible for FHA- or USDA-backed mortgages.

Mortgage rates jumped higher today at the fastest pace in weeks to the highest levels since March 30th. There were two key motivations for the increase, but one accounted for a vast majority of the damage. News came out overnight that spoke to the possibility of a prolonged blockade of the Strait of Hormuz. Markets took this seriously because it involved conversations with oil executives to assess the the impact of a prolonged blockade on domestic energy markets and fuel prices. Bond yields (which correlate with rates) and oil prices lurched higher again this morning after a White House official reiterated/corroborated the overnight news. The supporting actor in today’s rate drama was the Fed announcement. While the Fed didn’t hike rates, 3 voters voiced their opposition to the wording of the Fed’s statement because it tacitly implies the Fed is more inclined to cut rates vs hike them in the near future. Those 3 voters would prefer to indicate that rates could go either way depending on inflation and the economy. The market took this as a minor negative indication for rates. Measuring in terms of 10-year Treasury yields, more than 80% of today’s rate spike was in place before the Fed announcement came out. The average mortgage lender is back to 6.50% for top tier 30-year fixed scenarios, up from 6.38% yesterday. Most lenders made mid-day adjustments to even higher rates as the underlying bond market continued to suffer into the afternoon. 

Today’s Weakness Mostly War-Related With Small Boost From Fed

Because today was was a “Fed day” and because bonds hit their weakest levels of the day after the Fed announcement, we may look back on the selling and blame the Fed. In actuality, the Fed was only a small piece of the puzzle. Specifically, 10yr yields had already moved up from 4.34+ to 4.40 before the Fed announcement. At the 3pm CME close, there was only 1 more basis point of selling (4.41). The overnight/morning weakness was already covered in the morning commentary, but as a reminder, it had to do with the potential for a longer-term blockade of The Strait of Hormuz. There were no major issues with the Fed, but the market didn’t like the fact that 3 dissenting voters preferred to abandon the vague reference to future rate cuts via the “additional adjustments” verbiage. 

Econ Data / Events

MBA Purchase Index (Apr)/24

177.7 vs — f’cast, 175.6 prev

MBA Refi Index (Apr)/24

977.9 vs — f’cast, 1023.1 prev

Mortgage (Mar)ket Index (Apr)/24

298.5 vs — f’cast, 303.3 prev

Building Permits (Mar)

1.372M vs 1.39M f’cast, 1.538M prev

Building Permits (Feb)

1.538M vs — f’cast, 1.386M prev

Core CapEx (Mar)

3.3% vs 0.5% f’cast, 0.6% prev

Durable goods (Mar)

0.8% vs 0.5% f’cast, -1.4% prev

Housing starts number mm (Mar)

1.502M vs 1.40M f’cast, — prev

Market Movement Recap

08:31 AM weaker overnight and modest additional selling after 830am data.  MBS down 3 ticks (.09) and 10yr up 2bps at 4.369

10:07 AM MBS down 10 ticks (.31) and 10yr up 5.3bps at 4.402

12:01 PM Some volatility in response to news that the US is considering renewed strikes in Iran, but losses have been erased since then. MBS still down about 30bps and 10yr up 5bps at 4.398

02:16 PM Slightly weaker after Fed announcement. MBS down 14 ticks (.44) and 10yr up 5.8bps at 4.406

02:53 PM Weakest levels. MBS down nearly half a point. 10yr up 7bps at 4.42

The former Wall Street player blamed its decline on rising interest rates, trouble at its lending subsidiary, and debt stemming from the Great Financial Crisis.

CrossCountry increased its agreed-to offer for the real estate investment trust by 50 cents per share, as UWM Holdings made an unsolicited bid on April 20.

Newrez expects significant expense reductions from AI partnerships with HomeVision and Valon, as executives rule out mergers and a Rithm spinoff amid strong Q1 earnings.

Jonathan Corr, the former CEO of Ellie Mae, is one of six new members of MeridianLink’s board, added following its acquisition by Centerbridge Partners.

The Federal Open Market Committee’s April meeting — likely Federal Reserve Chair Jerome Powell’s last — is unanimously expected to keep interest rates steady, but questions about energy, inflation and the upcoming transition in leadership still loom.

Modest Gains After Opening Weaker

Tuesday ended up being a uneventful trading session despite 10yr yields hitting 3-week highs. Those highs were in place right at the open and things gradually improved from there. Markets are expressing a token amount of concern over the lack of progress on US/Iran peace, which  continues to be the biggest potential market mover. Notably, there was also an obvious reaction to Consumer Confidence data today (even though it was very small). This lets us know we can’t tune out other econ data just because the broader momentum is more likely tied to geopolitical developments. 

Econ Data / Events

ADP Employment Change Weekly

39.25K vs — f’cast, 54.75K prev

Case Shiller Home Prices-20 y/y (Feb)

0.9% vs 1.1% f’cast, 1.2% prev

CaseShiller 20 mm nsa (Feb)

0.4% vs — f’cast, -0.1% prev

FHFA Home Price Index m/m (Feb)

0.0% vs 0.2% f’cast, 0.1% prev

FHFA Home Prices y/y (Feb)

1.7% vs — f’cast, 1.6% prev

Consumer Confidence

92.8 vs 89.0 f’cast, 92.2 prev

Market Movement Recap

09:14 AM Modestly weaker overnight. 10yr up 2bps at 4.362 and MBS down 3 ticks (.09).

11:07 AM MBS down an eighth and 10yr up 1.8bps at 4.359

02:29 PM MBS down an eighth and 10yr up 1.5bps at 4.357. No reaction to 7 year auction

Bonds sold off slowly and steadily overnight, largely tracing a similarly steady rise in oil prices. The latter is most easily attributed to reports that Trump is not happy with the latest Iran peace proposal although those reports stopped short of saying the proposal was flat-out rejected. There was additional volatility in oil prices surrounding news that the UAE is pulling out of OPEC, but that mostly resolved with oil moving off the highs (more competition, less supply throttling expected). Most recently a decent showing in Consumer Confidence is keeping bonds in a defensive stance.