New week. Same grind. We’re waiting (likely for a good while longer) for the government shutdown to end before the most relevant econ data can truly exert influence on the bond market in the big picture. On the plus side, the trading in the interim has erred on the bullish side thanks to the available non-gov data and anxiety over trade tensions. So far this morning, bonds have rallied at the 8:20am CME open which is just something that can happen serendipitously due to trader positioning and is not tied to any underlying motivation in news/data.
NOTE: the Conference Board’s leading indicator index is not being published today. They are citing the shutdown as the reason even though they are not a government agency. 

Transunion will offer the credit scoring model for $4 in 2026, following previous moves made by VantageScore partners Experian and Equifax.

Regulators also accused Southern California-based E Mortgage of failing to properly supervise remote employees and cooperate with their examinations.

Approximately three years after the one-time non-depository bought Roscoe (Texas) State Bank, Cornerstone Capital Bancorp agreed to purchase Peoples Bancorp.

Flagstar shareholders approved a plan to merge its holding company into the bank; Huntington tapped a new chief auditor, along with two new business leaders; First Foundation hired a new chief credit officer; and more in this week’s banking news roundup.

Solve stages an acquisition, Intercontinental Exchange partners on new indices, Optimal Blue adds updates and Incenter offers a CRA loan trading platform.

While borrowing activity increased from a year ago, seasonal patterns and economic concerns suggest near-term slowing, the Mortgage Bankers Association said.

Logical Pull-Back on Tamer Tariff Talk, But Mortgages Outperform

If there was only one event to be aware of on Friday, it was a Trump comment around 7:10am ET in which The President said that the recently-announced 100% tariff on China was probably not sustainable. Stocks, bond yields, and volumes spiked instantly and nothing much happened for the rest of the day. Fortunately for the bigger picture, Thursday’s mid-day drama caused a big enough bond rally that Friday’s pull-back only managed to erode about half the gains. The news is even better for mortgage rates. Lenders had a big enough cushion from Thursday’s volatility that Friday’s pull-back merely resulted in rates holding steady on average. That means the average lender is fairly close to September’s lows which are close enough to the lowest rates in 3+ years.

Econ Data / Events

NY Fed Manufacturing 

10.7 vs -1.0 f’cast, -8.7 prev

Market Movement Recap

10:51 AM Slightly weaker overnight.  MBS down an eighth and 10yr up 4.1bps at 4.011

02:20 PM Slight recovery, but mostly flat all day.  MBS down 1 tick (.03) and 10yr up 3.1bps at 4.00

Under the category of careers that are, or will be, impacted, by artificial intelligence, attorneys are inevitably on it. Here’s a tale of a lawyer caught using AI while explaining to the Court why he used AI. In other legal mortgage news, California mandated forbearances for mortgage borrowers affected by wildfires. Meanwhile, is disaster assistance based on politics? Apparently California is not receiving any disaster assistance from the federal government from the fires nine months ago, and the city of Los Angeles joined a coalition of cities, counties, and local agencies in a lawsuit against the federal government over FEMA funding. Certainly the shutdown, recently begun, is impacting lenders, and in today’s Last Word at 1PM ET, Brian Vieaux, Courtney Thompson, and Christy Soukhamneut discuss how the government shutdown is impacting lenders and the broader housing market, rates hitting new year lows, and Chair Powell’s recent comments signaling a shift toward concerns over labor market weakness. (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 an interview with Finance of America’s Adam Potafiy on his session tomorrow at NAMB National with his colleagues Jonathan and Jessica about reverse mortgages and how they’re being reengineered for the next generation of clients.)

By process of elimination and ongoing forensic efforts, it’s becoming more and more clear that yesterday’s mystery rally in the short end of the yield curve was a product of liquidity/reserve stress in short-term funding markets. While the regional bank drama may have added fuel to the fire in a roundabout way, it was neither the match nor the flame. Episodes like this happen from time to time, especially in April and October as corporate tax deadlines create large short-term funding needs that can put strain on reserve balances (already a topic of conversation for the Fed recently, as they ponder the timing of the end of QT). In short, the market briefly worried that reserves were going to run too thin and the Fed would be forced to address it in a way that benefited short-term rates. The shortest term rates (like day to day SOFR) couldn’t benefit due to immense short-term borrowing needs and scarce reserves, so any market concern was forced to play out in the slightly longer term (a few months in the future vs a few days). With the more dire fears in the rearview (T, bonds are backing away from the panic trade a bit this morning, but the real catalyst was a 7:12AM newswires citing Trump saying Chinese tariffs will not be sustainable.