Stocks have made a bit of a round trip since last Friday when Trump’s tariff comments sparked a big sell-off.  Bonds benefited from that at the time.  So far this week, stocks have staged a solid comeback–especially today as upbeat earnings and Fed rate cut expectations provide support.  Bonds continue to rally on multiple Fed comments that focus on a weaker labor market underpin an increasingly clear rate cut picture.  Many market participants read yesterday’s Powell comments as endorsing another cut in October.  Bonds mostly had this priced in, but the absence of bad news is good news–at least good enough for more modest gains this morning. That said, gains are tougher to justify from here with yields pushing the lower end of the range boundary. 

While the debate rages on about whether the three colors of candy corn taste different, at the other end of the tech spectrum, lenders are weeding out unused or out-of-date technology, reviewing new tools, all the while looking at bad developments in the IT world. (Speaking of tools, Ben Teerlink, Founder/CEO, MMI, will be interviewed today at 11AM PT on the L1 show.) AI companies are paying people to fold laundry in front of robots so they can learn to do household chores. It’s disappointing that we may never see a robot get tangled in a fitted sheet. Robots and automatic machines aren’t new (the French were cutting edge 250 years ago). But now Americans, including potential borrowers, are losing millions to scammers at crypto ATMs. Crypto scams drew a lot of people who wanted to make money and didn’t care about victims. They abound. Here’s how companies profit. JPMorgan Chase isn’t taking any security chances at its brand-spankin’-new $3 billion headquarters in Midtown Manhattan, so it’s requiring employees to offer up biometric data in order to access the building: biometric access is now required to enter the skyscraper at 270 Park Avenue. (Today’s podcast can be found here and this week’s are sponsored by Floify, an industry-leading point of sale platform. With Floify’s new Dynamic AI feature, lenders can modify applications with no coding required and rely on AI to autofill key application fields, allowing borrowers to fill out only a few fields relevant to their needs. Hear Figure’s Anthony Stratis & West Capital Lending’s Arthur Greenbaum discussing the power of partnership, and why they’re excited about Figure’s new AI-powered DSCR platform.)

Mortgage rates are based on bonds and bonds are trading at their best levels since September 17th.  Of course there are different kinds of bonds, so we should specify that we’re talking about the bonds that are specifically tied to mortgages (MBS or mortgage backed securities).  With this in mind, it’s no surprise to see mortgage rates also at the lowest levels since September 17th.  The same was true yesterday, but today marked another incremental improvement.  Compared to yesterday, the bond market was actually fairly flat. So why did rates improve? It has to do with timing. Yesterday afternoon saw a decent rally in bonds (rallies = lower rates), but it was late enough in the day that many lenders didn’t bother adjusting their mortgage rate offerings until this morning. Bottom line: mortgage lenders were getting caught up with yesterday’s bond market rally.

Mortgage application activity declined again last week, though the drop was more moderate than the prior week’s pullback. According to MBA’s Weekly Applications Survey for the week ending October 10, total volume fell 1.8% on a seasonally adjusted basis and 2% unadjusted. The Refinance Index slipped 1% from the previous week but remains 59% higher than the same week one year ago. Refi activity has flattened out after September’s surge but continues to hold at elevated levels as some FHA borrowers take advantage of a rate gap of more than 10 basis points below conventional loans. “Mortgage rate movements were mixed last week, with the 30-year fixed rate decreasing slightly to 6.42 percent. Mortgage applications were lower than the week before, as conventional and VA applications saw declines,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “FHA applications saw a stronger week, and FHA refinance applications in particular increased 12 percent as the FHA rate stayed more than 10 basis points lower than the conventional fixed rate. Purchase applications declined for the third consecutive week but remained 20 percent ahead of last year’s pace as improving inventory conditions in certain markets continue to maintain homebuyer interest.” Purchase applications decreased 3% from the previous week on a seasonally adjusted basis and 2% unadjusted, but were still 20% stronger than a year ago. Activity continues to show resilience relative to last year’s depressed levels as buyers respond to slightly better inventory conditions.

The San Francisco-based banking giant reported a 9% annual jump in quarterly profits. It also made official its appointment of CEO Charlie Scharf as chairman.

If Experian eventually charges for VantageScore 4.0, it will be offered for at least a 50% discount compared to what Fair Isaac Corp. charges for its FICO score.

The megabank’s multiyear effort to simplify its business model and improve its risk management is starting to pay off in the form of more consistent profitability and improved returns, CEO Jane Fraser told analysts.

Lebda, who died over the weekend in an ATV accident, built one of the first online financial marketplaces in 1998.

Fannie Mae and Freddie Mac’s credit risk-transfers and some older private-label mortgage-backed securities have exposures to the Washington DC area.

Yields Hug Multi-Week Lows After Powell Speech

Bonds were remarkably resilient over the extended weekend given the moderate rebound in the stock market. As of Friday afternoon, yields and stocks swooned together in response to trade war escalation with China. Stocks recovered half those losses by 3pm, but were unchanged to slightly stronger. The morning hours suggested a modest sell-off, but buyers returned after Powell’s speech. He didn’t say anything that was obviously worth a rally, so perhaps it was the absence of hawkishness that helped.

Market Movement Recap

09:38 AM Losing some ground after stronger open. MBS down 1 tick (.03) and 10yr up 0.2bps at 4.036. 

01:11 PM Slightly stronger after Powell speech.  MBS up 3 ticks (.09) and 10yr down 0.2bps at 4.031

05:10 PM Little-changed at the close with MBS up 3 ticks (.09) and 10yr yields down 0.4bps at 4.029