Yesterday I published a link to Pennymac Policy Pulse, a newsletter tracking key federal policy developments shaping the housing market and broader U.S. economy. The link went to an old version; above is the link to the most current. (Today’s podcast can be found here and this week’s ‘casts are sponsored by Equifax, a global data, analytics, and technology company, helps mortgage lenders gain the borrower and market insights they need to improve efficiency and make accurate decisions. Access differentiated consumer credit data, powerful consumer and market insights, and income and employment data from The Work Number. Today’s has an interview with HELIX’s Carl Markman and Frank Perugini on improving borrower and loan officer experiences, accelerating loan processing, and growth in some of the fastest-expanding segments of the mortgage industry.) Broker and Correspondent Credit and Verification Products For decades, credit scoring was treated as a fixed input. Today, lenders have an opportunity to think differently. With score choice advancing and modern models leveraging trended data, mortgage risk assessment is moving beyond static snapshots toward a more predictive view of borrower behavior. TransUnion® is focused on helping lenders prepare for this evolution responsibly, through trusted data, advanced analytics and scalable, API‑driven solutions that integrate into existing workflows. Learn more about what this shift means for cost, competition and decisioning.

Yesterday’s most interesting development was the visible decoupling of bond yields with oil prices. To a lesser extent, one could also lament that mid-morning stock selling failed to benefit bonds, but that’s far from a regular correlation these days. In fact, the stock/bond correlation is often reversed when the market is adjusting Fed rate expectations. Today’s trading session has seen some re-coupling with yields/oil/stocks all falling together. Some of the bond-specific weakness could have been driven by the official launch of SpaceX’s big corporate bond, and there’s been a heavy slate of corporate issuance in June so far in general.
We can also expect random tradeflows in multiple market sectors simply due to it being late June and money managers being required to buy/sell in order to rebalance portfolios to account for recent market movement. Despite all of the above, bonds are trading in a boring consolidation pattern with this morning’s little rally adhering to a descending ceiling.
 

Ralo uses artificial intelligence to automate the entire process, saving consumers money by cutting out commissioned loan officers, processors and underwriters.

The proposal is $10 billion of general obligation bonds for affordable housing and $1.25 billion of revenue bonds for the state’s veterans home loan program.

The Senate passed a bipartisan housing package, which includes certain community bank provisions, in an 85-5 vote. The House is set to vote on the package Wednesday.

William Isaac led the Federal Deposit Insurance Corp. through the banking and thrift crises of the 1980s and was a frequent commentator on bank regulation after his time in public service.

Part of the proposal affects the risk weighting for certain “investment properties and other cashflow-dependent” mortgages, according to a new Pennymac report.

Mortgage rates gave back the improvement seen last Thursday and broke above last Wednesday’s levels to hit the highest mark since June 10th. This isn’t a big range in the bigger picture, but it does leave rates near 10-month highs. The move is also a bit counterintuitive given developments in other markets and typical correlations. For instance, On almost any other recent trading day, if oil prices and European bond yields are both moving lower (they are), so are U.S. bond yields and rates.  The disconnect may be as simple as an ongoing reaction to last week’s Fed announcement which confirmed that investors need to brace for a potentially higher rate path in the future and–at the very least–less transparency about how that rate path may evolve. [thirtyyearmortgagerates]

What’s Up With Bonds Decoupling From Oil, Etc.?

On the average trading day in the past few months, if oil prices were down, and especially if other bond markets were rallying, U.S. bonds were probably rallying too.  Today was the opposite and there are no glaringly obvious reasons. It’s the sort of trading session where analysts must go hunting for narratives to fit the unexpected trading action. The quarry of such hunts is fairly limited. There’s the notion of an “ongoing reaction to last week’s Fed announcement” (which we don’t love considering there was already a friendly bounce on Thursday) and from there things get even less concrete, though not necessarily wrong. The upcoming Treasury auction cycle could indeed be causing some hesitation to buy at the start of the week. There’s also some buzz surrounding military re-provisioning, which continues to imply ever-higher government debt issuance (a double whammy on auction week).  Either way, the recent range remained easily intact, so while it’s a bummer for today, it’s not exactly an emergency. 

Market Movement Recap

08:51 AM Weaker over the weekend. MBS down 6 ticks (.19) and 10yr up 3.8bps at 4.493

12:23 PM MBS down a quarter point and 10yr up 5.3bps at 4.508

03:41 PM MBS down 7 ticks (.22) and 10yr up 5.2bps at 4.508

European bond yields surged higher on Friday in response to political uncertainty in the U.K., among other things (ongoing global reaction to Fed day and U.S./Iran peace deal status, etc). Treasury yields were set to open higher in the overnight session as a result. All of the above is logical and fairly boring. What’s interesting is that Treasuries haven’t taken the opportunity to recover. European yields certainly have and oil prices have steadily dropped back toward Thursday’s lows. Additionally, the fact that 10yr and 2yr yields are up by the same amount suggests there’s not an active Fed trade going on. That doesn’t leave many compelling scapegoats. The only two that jump to mind are asset allocation trading (selling bonds, buying stocks), and perhaps some concessionary selling ahead of the Treasury auction cycle. On a more speculative note, the market could also be bracing for various Fed speeches this week, but we’d expect to see 2yr TSYs doing worse than 10s in that case.