Counting Down to Ending The Shutdown After Tuesday’s Holiday Closure

Bonds were weaker in the overnight session with at least some of the blame presumably going to a sudden improvement in the prospects for reopening the government. To whatever extent that blame is merited, the rest of the week is increasingly interesting. Tuesday is fully closed due to the Veterans Day holiday. A House vote on a shutdown resolution could happen as early as Wednesday. Even if the vote is looking more like Thu/Fri, any headlines that clarify the timeline or the details could be tradeable events.

Market Movement Recap

10:21 AM Moderately weaker overnight, but rallying back a bit now.  MBS down an eighth and 10yr up less than 1bp at 4.100

02:04 PM A hair weaker vs AM levels despite well-received 3yr TSY auction.  MBS down 6 ticks (.19) and 10yr up 1.8bps at 4.111

If members of the House can make it back to D.C. in sufficient numbers, there’s a real possibility that the shutdown will end this week. Some marketplace chatter is attempting to connect overnight bond market weakness to those prospects, but an early recovery suggests some skepticism (because the recovery didn’t coincide with any new news on the shutdown). Still, a logical case could be made for bond weakness when the shutdown ends, assuming a prolonged shutdown increasingly harms the economy. Either way, the real reaction will be reserved for real confirmation. Despite assumptive headlines, this would likely take several days at best.  From there, it’s not as if econ data is ready to release (other than the September jobs report).

The impacts of the federal government shutdown are hitting both originators and servicers, and as things drag out, the disruptions will increase.

The bill would provide pay for furloughed government workers, resume withheld federal payments to states and localities and recall agency employees who were laid off during the shutdown.

President Trump and housing regulator Bill Pulte are considering introducing a 50-year fixed rate mortgage that Fannie Mae and Freddie Mac would purchase.

The FHFA director hinted at a partnership in the works and doubled down on criticism of homebuilders and the Fed chair in a housing conference interview.

A trade group for participants in the clean energy loan program argues the upcoming regulations will be too burdensome and costly for participants.

The volume of home equity lines of credit expanded for the 14th consecutive quarter, driven largely by fintechs and other nonbanks that are accounting for more and more of the business.

The Consumer Financial Protection Bureau ended a consent order earlier than expected against the credit bureau TransUnion, saying the company already paid a $5 million fine and $3 million to consumers.

How was the Louve in Paris robbed? The password for the cameras was… ready? Louve. (I’m sure that the Smithsonian, MOMA, and Vatican IT staffs are busy changing theirs. (I have my passwords in a notebook… no one can read my scrawl.) Let’s hope that the Federal Aviation Administration has better security, and its website says, “The FAA manages the world’s safest and most complex aviation system. On an average day, we serve more than 45,000 flights and 2.9 million airline passengers across more than 29 million square miles of airspace.” Even with the Trump Administration lopping 10 percent of that off, it’s still a lot of flights… and many haven’t been paid in five weeks? Speaking of travel, the next time you’re waiting to board, watch out for gate lice. Huh? People who crowd around the gate at an airport, sometimes in an attempt to board before their allotted time, are known as “gate lice” by the airlines. (Today’s podcast can be found here and Sponsored by ICE. As the standard for innovation, artificial intelligence, efficiency and scalability, ICE is the technology of choice for the majority of industry participants, defining the future of homeownership. Today’s features an interview with Arc Home’s Lee Malone on the HELOC market: the need for it, the various products out there, and how it’s being utilized across origination channels.) Services, Products, Software, and Tools for Lenders and Brokers Eris SOFR Swap futures are an ideal solution for hedging the growing market for Adjustable-Rate Mortgage (ARM) loans. As the interest rate curve steepens, lenders and homebuilders are successfully using ARMs to generate originations and homesales by offering borrowers lower near-term payment amounts. Since the initial period of an ARM behaves like a fixed-rate loan, originators can hedge away the interest rate risk using a SOFR swap with the same tenor as the fixed-rate period (e.g., use a 3-year swap to hedge a 3/1 ARM). Eris SOFR Swap futures provide an easily-accessible and cost-efficient hedging tool, even for smaller originators. Hedging with Eris SOFR allows you to grow your volume by pricing more competitively and improving your execution, without fearing interest rate risk. To explore how Eris SOFR Swap futures can optimize your ARM hedging strategy, reach out to John Douglas.