Mortgage rates officially hit the highest levels since May 2024 yesterday, even though the average was almost imperceptibly higher than last Friday’s.  We saw a similarly small move today, but in the opposite direction. In other words, the average rate moved lower by an amount that won’t even have an impact on many of yesterday’s rate quotes. As always, keep in mind that our rate index is an average of multiple lenders and on days with very small changes, some lenders can be noticeably better or worse compared to the previous day. This morning’s economic data featured the Producer Price Index (PPI)–a report that measures inflation at the wholesale level.  It came in at lower levels than expected.  That would normally be good for rates, but it didn’t have much of an impact today.  Tomorrow’s inflation report–the Consumer Price Index (CPI)–is in a different league. If it undershoots forecasts by the same margin, rates would almost certainly move lower.  Conversely, rates would almost certainly rise if inflation overshoots forecasts. There’s no guarantee of rate-friendly data tomorrow simply because today’s inflation report was lower than expected. CPI frequently departs from PPI on any given month, even though the two tend to do the same things over longer time horizons.

Broad, Negative Momentum is Masking Normal Market Movers

Tuesday featured a much weaker PPI report that failed to inspire any lasting rally in the bond market. While there were a few ways to reconcile that specific turn of events by examining the internal components of the data, it’s also true that bond market momentum has been broadly negative recently.  At times like this, data has to work harder if it wants to push rates lower.  It can even seem like rates move higher whether the data is good or bad. Today’s recap video includes an in-depth assessment of this phenomenon. Long story short, things are still mostly logical, as long as we’re considering all the pieces on the board.

Econ Data / Events

Core PPI M/M

0.0 vs 0.3 f’cast, 0.2 prev

Core PPI Y/Y

3.5 vs 3.8 f’cast, 3.5 prev

Market Movement Recap

08:42 AM initial gains after PPI, but mostly reversed now.  MBS unchanged and 10yr down less than half a bp at 4.781

12:15 PM MBS unchanged and 10yr up 1.5bps at 4.798

03:04 PM nearly unchanged at the close.  MBS up 1 tick (.03) and 10yr unchanged at 4.783

“The older I get, the earlier it gets late.” It was early to bed last night for me, early to rise, since today we are heading to Austin, Texas for the Sales Rally at University Federal Credit Union. I am sure that a conversation topic will be the capital markets and why mortgage rates are doing what they’re doing (which will also be discussed on today’s Capital Markets Wrap at 3PM ET, presented by Polly). Another will be the regulatory environment in Trump II. How might Elon Musk, with Tesla’s headquarters near Austin, handle rules and regulations and approval processes? Some Musk watchers point to the tunnel his company is building under Las Vegas as an example. Time will tell. (Today’s podcast can be found here after 5:30AM PT and this week’s is sponsored by Calque. White-labeled buy-before-you-sell solutions powered by Calque help you increase purchase volume and increase realtor business by helping them differentiate with a better process. With coverage in the 48 contiguous states, what are you waiting for? Hear a chat between Robbie and me on what good originators are focusing on and what the beginning of conference season means for our respective travel schedules.) Lender and Broker Services, Software, and Products “Class Valuation, the nation’s largest AMC, announces the launch of its New Construction Expert Appraiser Panel. New construction appraisals require specialized expertise and precision, and this expert panel was created to meet those unique demands. Every appraiser on this panel has undergone a rigorous testing process and has demonstrated experience and expertise in new construction valuations. With ongoing training and a commitment to the latest standards, Class Valuation provides reliable results you can trust. With a proven track record and industry-leading credentials, Class Valuation’s New Construction Expert Appraiser Panel offers a comprehensive solution for builders and lenders. A nationwide network of certified appraisers, combined with robust quality assurance and 24/7 support, ensures timely valuations while mitigating risks and delays. Learn more about Class Valuation’s New Construction Expert Appraiser Panel and why the nation’s leading home builders and new construction lenders are using Class Valuation for their valuations.”

The top five banks had a combined servicing value of more than $25 billion at the end of the third quarter.

A deal would give Ackman a chance to expand Howard Hughes, known for its investments in master-planned communities and retail properties.

The Department of Housing and Urban Development did not assign any fault or liability in conjunction with the “historic” settlement.

Bonds Calmed Down After Early Weakness

This week’s relevant economic data is concentrated over the Tue-Thu time frame with Wednesday’s CPI being the most obvious headliner. Today’s session offered little by way of new information but nonetheless provided some insight as to how the market would approach this week’s data. In a nutshell, bonds remain defensive. The burden of proof remains on weaker economic data or lower inflation if we’re hoping to make a case for lower rates. “Dip buyers” are not looking eager to to step in front of the train of generally weaker momentum.  All that having been said, things certainly could have been worse today and it was some small solace that bonds leveled off after early weakness and ended up almost sideways on the day.

Econ Data / Events

Nonfarm Payrolls

256k vs 160k f’cast, 227k prev

Unemployment Rate

4.1 vs 4.2 f’cast, 4.2 prev

Market Movement Recap

09:23 AM Slightly weaker overnight but back near unchanged now. MBS unchanged. 10yr up 0.3bps at 4.767

11:21 AM Lows of the day, down an eighth in MBS.  10yr yields up 4bps at 4.805

02:08 PM Bouncing back to nearly unchanged territory.  MBS down 1 tick (.03) and 10yr up 1.4bps at 4.779

04:05 PM Sideways since the last update.  MBS down 2 ticks and 10yr up 2.4bps at 4.789

The former president of the servicing giant stepped down from his previous role in early 2024 but continued to hold board positions at parent and partner businesses.

The Consumer Financial Protection Bureau issued separate policy statements on “sandbox approvals” and no-action letters for fintechs — measures whose longevity is questionable with the incoming Trump administration.

The Palisades fire, stretched across an area larger than Manhattan and where the median home price approaches $4 million, has damaged or destroyed more than 5,000 structures.