“Buying eggs on the street and weed in the stores: the times they are changing.” Borrowers are certainly reacting to changes in rates as capital markets staffs are dusting off their renegotiation policies, explain early payoff penalties, and strategize on margins in volatile times (all of which are discussed in today’s Capital Markets Wrap at 3PM ET, presented by Polly). Of course, the stock market isn’t the economy, which is a good thing because, as of Friday, Barron’s calculated a $3 trillion reduction in the value of U.S. stocks since Trump’s Jan. 20 inauguration. Originators hope that their clients aren’t tying their down payment funds to anything stock market-related, and worry that the mood of potential clients will deteriorate if the stock market keeps falling, which in turn would impact their enthusiasm for buying a home. (More in capital markets section.) Despite Fed Chair Powell’s comments, rate cut expectations have been pushed forward in recent weeks. As deterioration in the labor market builds, coupled with downside growth risks stemming from tariff and fiscal policies, markets are pricing in nearly three rate cuts this year, which is a significant increase from just one expected cut at this time last month. (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 Mesa’s Maya Velasquez on how young people see the future of mortgage.)

Toronto-based Simply Approved Mortgages is opening for business in Florida and Colorado, looking for the cross-border success that eluded companies like Rocket.

The advances pushed the yield on three- to 10-year yields lower by 10 basis points on Monday, with the moves accelerating as US equities sold off.

A joint venture between the military-focused Palantir and investment conglomerate TWG will sell cybersecurity protection to financial institutions that are wary about the safety of artificial intelligence.

The legislation is aimed at loosening regulation of new-home construction in the Grand Canyon State, where median prices have shot up by 59% since 2020.

The selloff in US equities accelerated Monday, with major averages tumbling to their worst day this year, as investors braced for a slowdown in the American economy.

More Help From Stocks, But More Reluctance From Bonds

Up until just after 3pm ET, the stock market was on pace for its worst day of the recent selling spree in terms of day-over-day losses, but a rebound looks to be underway in the final hour of the NYSE session. The swan dive gave us another opportunity to observe the stock/bond dynamic whereby the correlation starts to increase when stocks are making bigger moves. In general though, it’s taken more and more convincing for bonds to even begin to move back toward recent lows. Case in point, 10yr yields stayed well clear of last week’s better levels and they weren’t even willing to break the AM lows despite the 3pm swan dive in stocks. A combination of upcoming Treasury auctions and important econ data (Wednesday’s CPI) is a good enough justification, but even last week, we were already talking about the bond rally being a bit overbought from a momentum standpoint.

Market Movement Recap

10:01 AM Stronger overnight, mostly in European hours.  MBS up 6 ticks (.19) and 10yr down 7.4bps at 4.224

01:14 PM Perfectly unchanged from previous update.

03:13 PM Additional gains as stocks swoon.  MBS up nearly a quarter point.  10yr down nearly 9bps at 4.211

03:40 PM Stocks bounce back now and bond yields following.  10yr down 7.7bps at 4.22.  MBS up 7 ticks (.22). 

Over the weekend, Trump was asked if he was expecting a recession this year. He replied that although he hates to predict such things, “there is a period of transition, because what we’re doing is very big.” There are a few ways to read that response, but one of the least debatable is that the administration views short term pain as an acceptable byproduct of doing big things. The byproduct of that byproduct is lower stock prices and lower bond yields. With that, bonds started out slightly stronger in Asia and kicked into higher gear in Europe. The domestic session is underway with healthy gains that create a good amount of distance from last Thu/Fri’s weaker levels.

“Depression is merely anger without enthusiasm.” People flying around the nation have probably observed, or have heard, a change in the mood of airport security screeners. It turns out that the Trump Administration outlawed unions at TSA. Change is afoot. In my recent travels around the country, it is clear that LOs have adapted their origination based on price and opportunity. For example, Deephaven’s Tom Davis points out that, “non-QM loans should be done by design, not by decline.” (He is waiting for the trademark on that.) Originators who focus on real estate agents believe that the top 5 percent of agents do 90 percent of the business… and ask other LOs “Where are you focusing your marketing efforts?” In terms of new business, the refinance share of market mortgage applications released last week reached nearly 44 percent, primarily to pay for remodeling and to pay off high interest rate credit card debt. Are you adapting? (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 AMC Encore’s Jordan Chapman on the journey of an appraiser turned AMC leader, exploring career challenges, industry insights, and the evolving role of women in mortgage and valuation, plus what it takes to get an AMC approved in today’s market.) Lender and Broker Products, Software, and Services

Conventional 30yr fixed mortgage rates hit their lowest levels in months last Tuesday morning, with the average lender right in line with levels from mid October or early December. After that, rates rose steadily for the next two days and leveled off on Friday. While the bounce was small enough to leave a vast majority of 2025’s improvement intact, it nonetheless raised the risk that the bond market would need more convincing before rates were willing to keep following the broader sentiment suggested by ongoing stock losses. Specifically, stocks are speaking to economic concerns. When stocks drop quickly enough, investors can seek safer havens, such as bonds.  When demand for bonds increases, rates fall, all other things being equal. Monday has been reassuring in that regard. Bonds are once again paying attention to weakness in stocks–it just happened to take a bigger drop in stocks that we saw last week. Despite the improvement in rates, we would still expect some resistance to the idea of rapid improvement unless the economic data begins to sound the same warnings as equities markets. On that note, the most relevant econ data on the near-term horizon is Wednesday’s Consumer Price Index (CPI), the first of the broad measures of inflation in the U.S. and one of the biggest potential sources of volatility for rates.