Mortgage rates spiked sharply on Monday, hitting the highest levels in more than a month as escalation fears ramped up surrounding the Iran war. Yesterday technically saw some recovery, but it may as well have been an “unchanged” day. Now today, we’re seeing a more legitimate recovery with the average lender back down to last Friday’s levels. The move follows a drop in oil prices inspired by progress toward a peace agreement. News came out overnight that The U.S. and Iran were close to signing a one-page memo outlining a more formal peace agreement. While full details would take time to hammer out, this would effectively end the war. Oil prices and bond yields fell at their fastest pace since mid April. Bond yields correlate with interest rates (in fact, they ARE interest rates), but mortgage rates are determined by slightly different bonds that are specific to the mortgage market. This means that mortgage rates and U.S. Treasury yields are almost always moving in the same direction, but at different paces, depending on the day.  [thirtyyearmortgagerates]

There was one, big, obvious market mover overnight. At 4:50am ET, Axios reported that the U.S. and Iran are close to signing a one page memo of understanding to end the war. Oil and bond yields were already in recovery mode, but this kicked things into higher gear. Most of the gains remain even after both sides offered refutations (which the market now perceives as merely a negotiation tactic). Subsequent reports from other sources also speak to specific details in the peace deal that seem to specific to be made up. In early trading, ADP employment data had no impact and Treasury’s confirmation of unchanged auction sizes helped bonds hold the overnight gains.

PennyMac Financial Services reported $82.3 million net income, inclusive of a $44 million net reduction related to servicing fair value and hedge losses.

Finance of America’s earnings per share came out to $1.10, double that of the first quarter of 2025 and well above the a S&P Capital IQ Pro consensus estimate of $0.84.

Credibly will bring its SMB loans and revenue-based financing products to Figure’s Democratized Prime platform, Figure said in a press release.

The lender and servicer, which continues to make investments ahead of a future high-demand cycle, has reported tumbling margins in the past year.

Federal Reserve Gov. Michael Barr said Tuesday that the U.S. energy sector is more insulated from shocks than Europe’s, particularly in natural gas prices. However, he warned that the war is pushing up gasoline prices, which could spill over into other parts of the economy.

Data Didn’t Hurt, But Bonds Underperformed The Oil Price Recovery

Today’s headline is somewhat misleading. It points out the fact that oil prices made it back to yesterday’s lows whereas bond yields didn’t even come close. This is all true, assuming we’re looking at front month oil prices. But if we use a longer-term futures contract for oil, the correlation with bonds was actually closer to 1:1. Either way, the bond rally only unwound a fraction of yesterday’s losses and that’s especially true for MBS (5.0 coupons lost half a point yesterday, but regained less than a quarter point today). Econ data didn’t hurt, but it didn’t exactly help either. ISM and Job Openings were both very close to consensus.

Econ Data / Events

Trade Gap (Mar)

-60.30B vs $-60.9B f’cast, $-57.3B prev

S&P Global Services PMI (Apr)

51.0 vs 51.3 f’cast, 49.8 prev

ISM Biz Activity (Apr)

55.9 vs — f’cast, 53.9 prev

ISM N-Mfg PMI (Apr)

53.6 vs 53.7 f’cast, 54.0 prev

ISM Services Employment (Apr)

48.0 vs — f’cast, 45.2 prev

ISM Services New Orders (Apr)

53.5 vs — f’cast, 60.6 prev

ISM Services Prices (Apr)

70.7 vs — f’cast, 70.7 prev

New Home Sales (Mar)

682K vs 0.65M f’cast, 587K prev

USA JOLTS Job Openings (Mar)

6.866M vs 6.84M f’cast, 6.882M prev

Market Movement Recap

09:04 AM Modestly stronger overnight with bonds following oil prices. 10yr down 1.5bps at 4.422 and MBS up an eighth.

10:08 AM Slightly stronger after 10am data. MBS up 5 ticks (.16) and 10yr down 2.7bps at 4.41

12:14 PM best levels of the day. 10yr down 3.2bps at 4.406 and MBS up a quarter point.

02:42 PM Off best levels. MBS up 5 ticks (.16) and 10yr down 2bps at 4.419

One popular refrain in the mortgage industry is that rates take the escalator on the way up and the stairs on the way down. Yesterday was definitely an “escalator” sort of day with the average lender moving up 0.12% for a top-tier 30yr fixed rate. Based on improvement in the bond market, rates are lower today, but just barely. It’s not so much that rates are taking the stairs down, but more like they’re a small child, waiting at the top of the staircase–afraid to take that first step. Some lenders are not even lower compared to yesterday’s levels. Others are only modestly better. The absence of better improvement is at least partly attributable to the slower movement in the underlying bond market. Specifically, today’s bond rally (good for rates) is less than one third the size of yesterday’s sell-off (bad for rates).

After hitting the highest yields in more than a month yesterday, bonds have managed to pick up a few bps. The bulk of the recovery was already in place by yesterday’s close, but yields dropped another 2bps after war-related headlines just after 8am (US general said Iran’s attacks yesterday were below the threshold for war). Oil prices and bond yields continue the same old correlation. 

Coming up at 10am ET, we’ll get 2 economic reports that have historically been capable market movers: Job Openings and ISM Services. We’ve seen some evidence that the market is still willing to react to data if it’s far enough from expectations, but that risk is a bit asymmetric at present. Reason being: investors are waiting for economic weakness to show up due to high fuel prices. So it doesn’t take as much of an upside surprise in the data to cause bond market weakness. Conversely, if data is slightly weaker than expected, that would be less of a surprise to most investors and thus not as much of a benefit to bonds.