Economists cautioned that October’s employment report may not provide a fully accurate representation of the economy due to recent hurricanes.

Remax, the real estate brokerage and mortgage broker franchisor of Motto Mortgage, rebounded from a year ago loss in a tough news cycle for both its businesses.

The wholesale lender filed a motion to dismiss the case, or at least to strike the class action certification in mid-October.

It is our longstanding policy to strictly avoid politics except in cases where the political realm legitimately intersects with relevant events for rates. Now is clearly one of those times. The discussion that follows contains no opinion or partisan leaning. Before getting started, let’s catch up with mortgage rates.  Things haven’t been great and much of the media coverage focuses on Freddie Mac’s stale weekly survey number.  Actual daily averages are already much higher. Today didn’t offer any material change on that front, leaving us free to focus on what may lie ahead. There is an objective correlation between various measures of the election outcome and recent rate movement.  Correlation is not necessarily causality, but comments from several high profile investors have bolstered the case for a Trump victory resulting in higher rates.  Notably, many of them qualify that by saying it’s more about the opportunity for full republican control of Congress and The Oval Office (i.e. the red sweep).   On one hand, there is certainly correlation here.  On the other hand, it’s far from perfect.  Additionally, there are other key events in this time frame that definitely account for a good deal of movement in interest rates–possibly enough movement to think twice before assuming we can even know how rates would react to the election. Today’s jobs report reaction provided the latest reason for doubt.  Rates refused to drop after a weak jobs report–something they’d normally be happy to do. There was an initial, reflexive drop in 10yr Treasury yields, as seen in the chart below, but it was quickly erased. Treasury yields are well-correlated with mortgage rates.  A chart like this can show us intraday momentum in the bond market whereas mortgage lenders only update mortgage rates 1-3 times a day depending on volatility.  This was a relatively low volume move for a jobs report-further suggesting the market’s mind is elsewhere.

Why Bonds Tanked Despite Super Low NFP

Nonfarm Payrolls (NFP) came in at 12k versus a median forecast of 113k, and a previous reading of 254k.  If those were the only facts you knew, on almost any other jobs report day in the history of jobs report days, you’d be well advised to bet heavily on a bond rally.  The fact that bonds tanked can only be explained by an unknown combination of two things–maybe 3.  We’re all already family with bonds generally weakening ahead of the election.  That could be an ongoing factor behind today’s weakness. But there’s also some nuance in the jobs report if we agree that the payroll count was artificially distorted by temporary events.  Lastly, ISM prices rose to the highest levels of the year. This could have some traders thinking “what if inflation has another bounce like it did in early 2024?” This might seem like a longshot, but bonds were still in positive territory by the time ISM came out. 

Econ Data / Events

Nonfarm Payrolls

12k vs 113k f’cast, 223k prev

Unemployment Rate

4.1 vs 4.1 f’cast, 4.1 prev

ISM Manufacturing

46.5 vs 47.6 f’cast, 47.2 prev

ISM Prices

54.8 vs 48.5 f’cast, 48.3 prev

Market Movement Recap

10:07 AM Initially stronger after NFP, but losing ground since 8:50am ET.  MBS still up 3 ticks (.09) but 10yr unchanged at 4.287

11:09 AM Additional weakness.  MBS down an eighth on the day and 10yr up 5.4bps at 4.34

01:43 PM Weakest levels.  10yr up 7.8bps at 4.364.  MBS down 6 ticks (.19).

04:47 PM going out at new highs for 10s, up 9.8bps at 4.385, and new lows for MBS, down 7 ticks (.22) in 5.5 coupons.

Not only do most states “gain an hour” Sunday, but I have good news for all my readers. I am getting stronger with age. I can now lift $100 worth of groceries with one hand! Speaking of which, time flies and Thanksgiving will be here before you know it and with it, pumpkin pie. (Yes, I know that this is a mortgage commentary, but even pumpkins have their share of regulation and controversy.) Pumpkin is a variety of squash belonging to the “Cucurbitaceae”, or gourd family which also includes melons and cucumbers. Libby’s, for one, uses 100% Dickinson pumpkins in its Libby’s solid pack pumpkin, not squash. Although pumpkins and squash are very closely related, Libby’s denied that it ever used a “blend” of various squashes in its popular canned pumpkin. The FDA allows for sweet squash blends to be sold under the label of “pumpkin.” “But the ‘Libby’s Select’ strain of Dickinson is our own, developed over decades by our own agricultural people.” (Today’s podcast can be found here, and this week’s is sponsored by Truv. Truv lets applicants verify income, employment, assets, insurance, and switch direct deposits. Unlock the power of open finance, with Truv. Hear an interview with Insellerate’s Josh Friend on a new AI platform that helps mortgage companies identify, convert, and keep customers happy.) Lender and Broker Software, Services, and Products Optimal Blue continues its commitment to delivering high-impact solutions that tackle real-world challenges and help clients maximize profitability with three major product releases: the expansion of its AI assistant suite, Scenario Optimizer, and the free availability of Investor Pricing Insight. The Position Assistant in the CompassEdge hedging and trading platform empowers lenders with critical daily insights into changes in their risk exposure by automatically summarizing the top drivers impacting their hedged mortgage pipeline positions. The addition of Scenario Optimizer to the Optimal Blue PPE enables originators to quickly identify the most favorable loan scenarios, enhancing productivity while strengthening relationships with borrowers through fast, digital service and transparent pricing guidance. The Investor Pricing Insight data solution now offers new functionality allowing investors to benchmark their non-QM rate sheet pricing against other investors in real time, all at no additional cost to investor clients. Read more in the press release.

When the median forecast for today’s jobs report began circulating, many a market watcher felt that the 113k forecast was too low compared to the 254k previous reading, even after considering the potential disruptions from hurricanes and strikes.  Fast forward to today and the 12k (yes that’s TWELVE Thousand) number is surprising even those who were trying to reassure others that the forecast was not too low.  Expectations will continue to be defied as the bond market will likely disappoint anyone who expected a 12k NFP to spark a massive bond rally.  The plan was always to take this number with a grain of salt and instead focus more on the unemployment rate, which happened to come in right in line with expectations. 

In the bigger picture, we can see just how underwhelming the response has been.

Nerdwallet purchased Next Door Lending for $1 million, SEC filings show.

For the eighth consecutive quarter, ICE Mortgage Technology lost money on a GAAP basis. Using a pro forma calculation involving Black Knight, operating income increased from a year ago.

Consumers are meanwhile filing objections to the near $1 billion in settlements from the nation’s largest brokerages ahead of a November court approval.