Rep. French Hill, R-Ark. — one of the leading contenders to chair the House Financial Services Committee next year — focused on ‘debanking’ of crypto and other companies in his questions to the witnesses.

Bonds drifted steadily higher in yield during the overnight session with most of the weakness seen after European markets opened. The net effect was roughly 4bp increase in 10yr yields and an eighth of a point of weakness in MBS.  ADP data did no harm at 8:15am, but bonds stayed near opening levels during the first 2 hours.  Today’s marquis data–ISM Services–came out much weaker than expected.  That was all it took to spark a reversal that leaves 10yr yields almost 3bps lower heading into the PM hours.  The eighth point loss in MBS has turned into an eighth point gain.

Mortgage lenders generally try to avoid setting rates more than once per day, but they will make changes if the underlying bond market is moving enough.  Mortgage Backed Securities (MBS) are the bonds that directly dictate mortgage rate movement.  When they’re stronger/higher, it implies downward pressure on rates and vice versa. MBS started the day in weaker territory, which is why the average lender started the day by offering just slightly higher rates compared to yesterday’s latest levels.  But MBS improved with the rest of the bond market after the morning’s economic data was released. When MBS improved enough, many lenders revised their rates slightly lower than yesterday’s latest levels. Technically, the average lender is at the lowest levels in over a month, but there’s been very little change in the average since last Friday.  The following chart of MBS may help explain why.  Keep in mind that the higher the blue line is, the better it is for rates.  The red line shows the central tendency of the past few days of movement.  Bottom line, despite the ups and downs, MBS have been reasonably flat this week.

No Whammies From Powell as Rates Rally on ISM Data

Bonds came away from this morning’s economic data with a tailwind that helped turn losses into gains.  The ISM Services PMI was the biggest contributor.  In addition to headline PMI being much weaker than expected, the employment index was also lower than last month, and the price index was unchanged. The only thing bonds had left to fear on the day was Powell’s afternoon Q&A, but there were no surprises and, thus, no reaction in rates.  Lenders were free to reprice for the better if they hadn’t done so before Powell.  Despite the gains, trading levels continue hitting the same resistance marked by 10yr Treasury yields just under 4.20%.

Econ Data / Events

ADP Employment

146k vs 150k f’cast, 233k prev

S&P Services PMI

56.1 vs 57.0 f’cast, 55.0 prev

ISM Services

52.1  vs 55.5 f’cast, 56.0 prev

Market Movement Recap

08:23 AM Moderately weaker overnight and little-changed after ADP data. MBS down 6 ticks (.19) and 10yr up 5bps at 4.273

10:03 AM MBS up to “unchanged” after the ISM data.  10yr up 1.6bps at 4.24.  MBS outperforming due to strength in the short end of the yield curve (i.e. 2yr yields are down 0.8bps on the day).

12:12 PM stronger still… MBS up an eighth and 10yr down 2.8bps at 4.196

03:02 PM Steady near best levels.  MBS up 5 ticks (.16) and 10yr down 4.1bps at 4.183

My cat Myrtle never had to worry too much about things like… money. Elon Musk, however, can’t seem to catch a break and his $56 billion (yes, with a “b”) pay package didn’t fly. Attorney Brian Levy seems to have trouble taking the new Department of Government Efficiency (D.O.G.E.) to be headed by Elon Musk and Vivek Ramaswamy seriously. Find out why in his latest Mortgage Musings which you can also get delivered to your email box for free by subscribing here. Elon Musk’s name may be intertwined with that of the nominee for Secretary of Treasury (who will work closely with whoever heads up the FHFA, especially if Freddie and Fannie are, once again, sent down the path toward being released from conservatorship). Love Musk or hate Musk, whether dominating the roads with Tesla, space with Space X, the internet with Starlink, social media with X, or the brains of humans with Nuralink, apparently, his influence will impact the U.S. Government payroll. Valuations at Elon Musk’s SpaceX and xAI have soared since the election. The billionaire rocket builder plots a huge share sale while AI start-up closes in on $5 billion funding round. But Guy S. reminded me that the total payroll of the federal government is about $110 billion a year and Federal government spending is $6.1 trillion. You cannot meaningfully shrink the federal government by firing “unelected bureaucrats.” Stay tuned! (Today’s podcast can be found here and Richey May is sponsoring this week’s. Richey May’s consulting, cybersecurity, business intelligence, and automation services are designed by mortgage experts to help you continue to drive growth and increase profitability. Hear an interview with the Institutional Risk Analyst’s Chris Whalen on competition for a (potentially) private Fannie and Freddie, when the Fed will be forced to restart quantitative easing (QE), the yield curve under President Trump, and the latest on capital requirements.)

The news comes weeks after the servicing fintech announced its latest venture capital raise.

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In a report Tuesday, credit bureau Experian predicted that government identity systems could get an update in the coming year. Here’s what else could happen.

In a wide-ranging interview, Tim Bowler, president of ICE Mortgage, discusses his views of the road ahead, the most crucial aspects of servicing distressed homeowners and why he took a mid-career role as an intern.