The Treasury’s financial crimes arm alerted banks to the dangers of AI-powered fraud, urging close monitoring and swift reporting of any suspicious activity.

The new president of Movement Mortgage previously held senior positions at Stearns Lending, Caliber Home Loans, Bank of America and Countrywide.

The rise of private credit has had a surprising side effect: it’s made borrowing cheaper for companies in other high-yield markets, and has probably made a key barometer of credit risk less accurate.

Lower rates during the period helped independent mortgage bankers make money on their originations but they posted losses on servicing.

Powell Rains on Bond Market’s Mini Parade

Today is a bit of a mirror image compared to yesterday.  Bonds lost ground after the AM econ data and then began improving heading into the afternoon hours.  Despite the gains, the yield curve suggested some apprehension ahead of Powell’s speech/Q&A in Dallas this afternoon. Fears proved to be justified as Powell echoed colleague’s recent quips regarding a slower pace of rate cuts than previously foreseen. This isn’t a surprise considering the recent econ data, but confirmation was worth a bit more selling of shorter-dated Treasuries.  MBS got swept up in that trade and ended up trading a 7 tick (.22) gain for a 6 tick (.19) loss as of 4pm ET. Fairly uneventful in the bigger picture.  

Econ Data / Events

Jobless Claims

217k vs 223k f’cast, 221k prev

Continued Claims

1.873k vs 1.888k f’cast, 1.892k prev

Core PPI M/M

0.3 vs 0.3 f’cast, 0.2 prev

Core PPI Y/Y

3.1 vs 3.0 f’cast, 2.8 prev

Market Movement Recap

08:37 AM Slightly stronger overnight.  Weaker after data.  MBS down just over an eighth and 10yr up 1.8bps at 4.482

09:43 AM Back into positive territory.  10yr down 4.9bps at 4.415 and MBS up an eighth of a point.

02:48 PM Off the best levels with most of the selling in the short end of the curve.  MBS still up 2 ticks (.06) on the day but down 6 ticks (.19) from the highs.  10yr yields down 5bps at 4.415

03:12 PM Additional losses after Powell speech.  MBS down 3 ticks (.09) and 10yr down 1.7bps at 4.446

Losses… weakness… selling pressure…  When any of these things happen in the bond market, it puts upward pressure on interest rates.  Mortgage rates are primarily determined by bonds, after all.   Today started out well enough for the bond market.  This allowed mortgage lenders to set today’s rates roughly in line with yesterday’s levels.  That makes for 3 days in a row with the average lender offering top tier 30yr fixed rates just a hair above 7%.  Fed Chair Powell have a speech and answered questions today at a regional event in Dallas.  He echoed recent comments from other Fed speakers regarding the pace of Fed rate cuts. In short, Fed sentiment is shifting in favor of slower pace. As we hopefully learned from the market movement heading into (and out of) the Fed’s September meeting, expectations for Fed rate cuts have an immediate impact on longer term rates like mortgages. Days like today contribute to cooler expectations for rate cuts and thus put upward pressure on rates.  That’s not immediately apparent in mortgage rates, but this had more to do with the timing of bond market movement today.   Fortunately, bonds had gained some ground before they lost ground.  The net effect is not big enough for most mortgage lenders to raise rates. 

The morning has been both straightforward and interesting.  The straightforward part involved a moderate sell-off following stronger economic data.  Jobless claims fell (both weekly initial claims and continued claims), and core PPI came in 0.1 higher than expected in year over year terms.  A saving grace on the inflation front was the as-expected result in monthly core PPI (0.3 vs 0.3) and the fact that it was almost lower than expected (unrounded number was 0.253, which is about as low as it could be without rounding down to 0.2). The interesting part of the morning has been a quick return to positive territory.  The gains are not data-driven and the only objective justification would be a series of big block trades in 5 and 10yr notes that came in right as yields were peaking. 

Demographics matter. Although I am sending today’s Commentary out from a Dunkin’ near Columbus, Ohio, yesterday I found myself visiting a supposedly haunted hotel in Chattanooga, possibly the last “weather kiosk” in the world in Knoxville, a tourist attraction near Lexington built like an ark, and in a tavern, for lack of a better term, in Kentucky, and a fellow at the bar struck up a conversation with me. He explained that his family had moved from Wisconsin to Florida, found it intolerable, and was now thinking about living near Lexington. Per Prashant Gopal of Bloomberg, lots of investors snapped up land in Kissimmee, Florida, the suburb of Orlando, with the goal of making an easy buck renting them out to tourists trying to visit Disney. The suburb has over 30,000 short-term rentals, more than any other city in America, so lots of supply and not as much demand. The solution? Hire Home Theme Orlando, which will renovate the houses at a starting price of $150,000 a pop to make them “themed.” The ”theme” of this week in Mar Largo has been proposed appointments, and eventual changes in Washington DC. And today is another episode of The Big Picture at 3PM ET (click here to register). Today’s show has Mark Calabria (he was the Director of the Federal Housing Finance Agency – FHFA – and chief economist for VP Pence) discussing the possible future of Freddie & Fannie. (Today’s podcast can be found here. This week’s is sponsored by Floify. Floify is an easy-to-configure point-of-sale platform that allows each branch or loan officer to customize its look and feel to meet the needs of their lending team, homebuyers, and market. Today’s features an interview with CMG Financial’s AJ George on the strategy of mergers and acquisitions from an executive’s perspective.)

China raised $2 billion from three- and five-year securities at one and three basis points over Treasuries, respectively, according to a person familiar with the matter.

The study found nonbank lenders charging the highest interest rates and most points, and fintech pricing more in-line with depositories.