“Buy the rumor, sell the news” is an age-old aphorism in financial markets for a reason.  It accurately speaks to the real and repeatable phenomenon whereby traders trade all the information and indications about a specific event well before the event itself.  The most obvious and and reliable example is that of Fed rate cuts/hikes which even have their own futures contracts.  The most relevant example at the moment is that of the pre-election trade whereby bonds priced-in greater odds of a Trump victory and full republican control of congress.  Traders knew rates needed to move higher but the perfect amount of selling was/is a moving target.  It continues to be sorted out, but the past 2 days tell us that the market did a very good job of selling almost exactly the correct amount of the rumor.  Traders are now buying the proverbial news.
All of the above can be loosely visualized in the following chart, which shows 10yr yields hitting closing levels at or near 4.27 on 6 of the 7 days ending on election day.  As expected in our base case, there as an obligatory bout of additional selling after the election and we’ve since returned almost perfectly to the 4.27 baseline.  

This is actually NOT YET a great example of buy the rumor sell the news.  4.27 is a very high yield as recently as the beginning of last week.  A true example would involve a return of yields back toward 4%–something that doesn’t seem to be in today’s most immediate cards.  Indeed, the moment 10yr yields hit 4.27 this morning, they bounced higher and are now back over 4.31%.

Many believe, and with good reason, that there will be some turnover at the CFPB coming up. Here are the pay grades if you’re interested in a job. (I can’t attest to the accuracy of Rohit Chopra’s comp.) The MBA’s latest prediction for 2025 is that residential volume will be up nearly 30 percent, and the industry hopes the MBA is right. According to Curinos’ new proprietary application index, refinances decreased 38% in October; the purchase index decreased 32% for October as a whole. But October 2024 funded mortgage volume increased 50% YoY and increased 15% MoM. (Curinos sources a statistically significant data set directly from lenders to produce these benchmark figures.) At the other end of the mortgage digestive system, in the capital markets, the Fed’s MBS holdings have been running off, often through refinancing, so someone out there is doing them! (Today’s podcast can be found here, and this week’s is Sponsored by Calque. Partner with Calque to offer better loan solutions. Scale your business with a partner that puts your brand first and empower your clients to buy before they sell. Hear an interview with Prajna AI’s Ramesh Sarukkai on how mortgage companies can utilize the various types of AI to maximize enterprise value.) Lender and Broker Software, Services, and Products Major announcement from Byte Software. The enterprise-class features in BytePro are now available in ByteWeb, a new browser-based LOS platform featuring a fresh, modern user interface. With unlimited custom screens and fields, validation rules, macro automation, TRID warning lights, and much more, ByteWeb is available with the same affordable pricing structure that has allowed Byte clients to lower their costs while other lenders are stuck paying minimums based on 2021 production. You don’t have to choose between LOS functionality and affordability. It’s time to stop settling and start doing things your way. Designed to be both powerful and flexible, Byte gives you total control over your loan process and the freedom to do business the way you want. Maximize efficiency with a new browser-based UI, unlimited custom screens & fields, powerful data governance, flexible API, and workflow automation you can deploy with your in-house team. Request a demo to see why 97% of mortgage bankers say they would recommend Byte to their peers or visit here to learn more.

The amount of income needed to make monthly mortgage payments are declining and approaching a key affordability benchmark, the National Association of Realtors found.

The Vienna, Virginia-based credit union will pay tens of millions of dollars in penalties over what the agency said was “junk fees” charged to Navy Federal’s customers.

The National Association of Homebuilder’s chief economist lays out a timeline for the market, and describes how new construction today compares to existing home sales.

The post-election spike in the 10-year Treasury yield could translate to higher rates for the 30-year fixed rate mortgage in the short term.

AI agents can help route tasks and make decisions along the way, but a human in the loop will still be needed to ensure effectiveness.

There’s a distinct risk that, even in the financial community, that people will look back on today’s drop in interest rates and conclude it must have something to do with the Federal Reserve’s latest policy announcement.  After all the Fed did cut its policy rate by 0.25% today, and the Fed was the only big ticket event on the calendar. Unfortunately, almost all of the improvement in rates was in place well before the Fed announcement was released.  This isn’t a case of financial markets moving into position for an expected outcome either.  The Fed’s cut was 100% expected, and Fed Chair Powell had nothing too surprising to say (even if the delivery was memorable when he was asked if he’d resign if asked by the president). So why did bonds/rates improve so much? We have to apply the same logic to gains that we’ve applied to other election related volatility.  The election mobilized a massive (and massively volatile) amount of trading positions in the bond market and beyond.  We’ve seen several rate spikes that were just as bad as today’s rate drop was good.  All we could do with many of those was simply take them in stride and chalk them up to the exceptional volatility and highly charged environment. Today’s friendly volatility is a constant invitee to these episodes, even if it feels like it doesn’t show up as frequently as other guests. To some extent, this morning’s Jobless Claims data may have contributed, but it doesn’t make sense to give it too much credit until other data shows similar cause for concern (continuing jobless claims are up to the highest levels in several years).

Breaking Down The Big Non-Fed-Related Rally

As intraday charts give way to daily charts in the coming weeks, it will be all too easy to look back on today’s calendar and conclude that it could only have been the Fed announcement that was capable of motivating a 10+bp rally in Treasuries and a half point gain in MBS.  As we here in the past know, that rally was largely already in place ahead of the Fed announcement. We can’t chalk it up to the high continued claims number, though that may have helped. The simplest theory is that there are “dip buyers” in bonds now that the election is over.  It’s not a bad one, but we could just as easily say that a glacial drift toward higher rates got ahead of itself yesterday and fell back in line with the trend today.  Either way, MBS and mortgage rates have outperformed the move in Treasuries, and there’s at least a moment of hope for optimists to imagine an inflection point.

Econ Data / Events

Jobless Claims

221k vs 221k f’cast, 218k prev

Continued Claims

1892k vs 1880k f’cast, 1853k prev

Market Movement Recap

08:40 AM Slightly stronger overnight and little-changed after jobless claims data.  MBS are up a quarter point and 10yr yields are down 1.6bps at 4.415

12:35 PM Additional gains all morning.  MBS at best levels, up half a point. 10yr down 9bps at 4.34

02:27 PM unchanged to a hair weaker after Fed announcement.  MBS up 15 ticks (.27) and 10yr down 7.6bps at 4.356

03:11 PM 2 way trading after Powell press conference, but mostly stronger.  MBS up more than half a point and 10yr down 11.3bps at 4.318

Experts anticipate a pullback in regulatory action and some potential pain for home builders but long-term interest rate impacts are a major question mark.