Bonds initially drifted into slightly weaker territory in the overnight session, but began bouncing back just after 9am ET.  All this in spite of a quick spike in oil prices on an announcement from Trump regarding “maximum pressure” on Iran (intended to counter Iran’s nuclear proliferation and “drive oil exports to zero”).   Bonds continued improving after the mixed JOLTS data.  Job openings aren’t quite as low as they were at the cycle lows in August, but the drop was more than enough to offset the uptick in “quits.”  Both numbers correlate with rate movement (i.e. lower=lower and vice versa).

How’s your ability to predict the weather? Apparently not good if you’re a groundhog. It is not hard to predict how you’ll hear from the IRS, if you do: The IRS always communicates through the mail, never by email or text. (There’s a scam tip you can pass along to your clients.) And LOs have all seen people incorrectly predicting the direction of interest rates and incorrectly predicting a U.S. recession. President Trump is predicting he will improve housing affordability; Mark Cuban predicts the biggest hit to housing affordability in 2025 is homeowner’s insurance, regulated at the state level of course. That is a safe bet, as it is already a major expense in many areas. There’s a lot of news being thrown at our industry, and much of it was discussed at the MBA’s IMB conference last week. In fact, the subject of today’s Advisory Angle at 2PM ET, presented by STRATMOR Group, is “From the Conference Floor: Actionable Insights for Mortgage Lenders from IMB 2025” featuring Garth Graham, David Hrobon, and Sue Woodard discussing the highpoints and key takeaways from the IMB conference. (Today’s podcast can be found here and this week’s is sponsored by Optimal Blue. OB bridges the primary and secondary mortgage markets to deliver the industry’s only end-to-end capital markets platform, helping lenders maximize profitability and operate efficiently so they can help American borrowers achieve the dream of homeownership. Hear an interview with Outamation’s Devang Kamdar on SOC and ISO accreditations and the future of data in the mortgage industry.)

Treasury Secretary Scott Bessent, who was named to be acting director of the Consumer Financial Protection Bureau, has told the agency’s staff to put a halt to all rules, enforcement actions and hiring.

The mortgage securities guarantor told the Government Accountability Office it was held back by the limits of its role and information sharing constraints.

The wholesale and non qm lender said it’s placed Serene Vernon on administrative leave and elevated capital markets officer John Hamel to the role of president.

The president has named Treasury Secretary Scott Bessent to run the Consumer Financial Protection Bureau on an acting basis after firing CFPB Director Rohit Chopra over the weekend.

The company, which became a depository in 2022, will be offering affordable housing products and initiatives in 45 states and the District of Columbia.

We know that mortgage rates are driven by financial markets and we know that financial markets have experienced volatility amid the roll-out of new tariffs over the weekend. But rates are starting the current week right in line with Friday’s latest levels (themselves, little-changed from any other day last week).  Part of the paradox is down to timing.  Specifically, the bonds that underly day-to-day rate movement are indeed experiencing volatility, but it’s all coming out in the wash, so to speak.  Big moves in one direction have frequently and rapidly been offset by moves in the other direction.  In addition, volatility that transpires in the early morning or late afternoon is often outside the window that has a direct bearing on mortgage lenders setting rates for the day. Monday stood a chance to see rates fall compared to Friday, but tariff headlines brought the market back in the other direction at the last possible moment.  The net effect was an average top tier 30yr fixed rate that was perfectly unchanged from last week.  This won’t go on forever, of course.  Apart from coincidental luck running out, rates will be forced to take cues from any consensus in the the economic data.  For instance, if the data over the coming days is mostly weaker than expected, rates would be more likely to move lower. If the data is strong, rates would be more likely to move higher.  

In-Range Volatility on Tariff Headlines, But Broadly Sideways

If you are following along with intraday market movement and not taking breaks to zoom the chart out, volatility seems to be rather extreme at the moment. Bonds began the day in stronger territory, bounced back to unchanged in the first 30 minutes, rallied sharply after data, gave up the rally almost immediately thereafter and then continued selling back to unchanged levels just before the 3pm CME close.  All of the above transpired in a 9bp range in 10yr yields, but moved of it was in a 4bp range. Tariff headlines are certainly good for some of that in-range volatility, but we have yet to see them set any big picture tones.  Today’s best attempt was the selling spree just after 10am ET following news that tariffs on Mexico would be delayed until March 1st. 

Econ Data / Events

S&P Manufacturing PMI

51.2 vs 50.1 f’cast, 49.4 prev

ISM Manufacturing PMI

50.9 vs 49.8 f’cast, 49.3 prev

ISM Prices

54.9 vs 52.6 f’cast, 52.5 prev

Market Movement Recap

09:56 AM Slightly stronger overnight as stocks swoon on tariff announcements.  MBS up 1 ticks and 10y down 2.9bps at 4.508

10:54 AM Lots of volatility surrounding 10am ISM data and US/Mexico tariff pause. MBS now down 1 tick (.03) and 10yr up 1.1bps at 4.526, both near the day’s weakest levels.

02:06 PM Mostly holding a fairly narrow range, but currently at the lower end of that range with MBS down 2 ticks (.06) and 10yr yields down 0.3bps at 4.534

02:53 PM Just off weakest levels of the day. MBS down 3 ticks (.09) and 10yr up half a bp at 4.54

As we discussed heading into the weekend (and the likely official tariff announcement), the only recent, conclusive track record the market has for tariffs is that they cause enough economic contraction to offset any inflationary implications. True, the bond market traded with some caution as tariff plans came into focus, but tariff-driven selling was always a very small drop in the bucket compared to data-driven selling and speculation over other impacts of fiscal policy (i.e. pro-growth and lower revenue). With all that in mind, don’t be surprised to see bonds paying more attention to the economic implications of big tariffs. This is easiest to visualize on days where the stock market is tanking hard and bonds are benefiting from a flight to safety.  Similarly, don’t be surprised when the overnight bond rally reverses on reports of fruitful talks between Trump and Mexico’s president (which included a 1 month pause on US/Mexico tariffs).  No surprise that the bounce bounce aligns with a bounce in equities as well…