Juxtaposition of Escalation and De-escalation Keeping Bonds Volatile

Tuesday was notable for financial markets’ attempts to trade the Iran war due to the conspicuous juxtaposition of newswires that spoke to opposing developments. Around 1pm ET, troop deployment news sent yields to the highs of the day. A little over an hour later, the newswires gave the impression that the war was almost over–so much so that bonds were willing to retrace most of the 1pm losses. Nonetheless, yields were already elevated by 1pm, which means it was a weaker trading session overall. Material developments in the war will continue to be more actionable for markets than scheduled economic data–especially this week. 

Econ Data / Events

Labor Costs

4.4 vs 3.5 f’cast, -1.9 prev

Market Movement Recap

08:51 AM Losing ground in choppy trading as oil rebounds. MBS down a quarter point and 10yr up 4.2bps at 4.389

09:54 AM weakest levels. MBS down 11 ticks (.34) and 10yr up 6.2bps at 4.409

12:30 PM Off lows, but choppy.  MBS down 5 ticks (.06) and 10yr up 2.6bps at 4.373

01:03 PM Bumpy 2 year Treasury auction causing weakness.  MBS down 3/8ths again and 10yr up 7.2bps at 4.42

03:33 PM recovering a bit after “war over soon” headlines. MBS still down 6 ticks (.19) and 10yr up 3.8bps at 4.385

Even though there were doubts about their scope and impact, yesterday morning’s headlines introduced the prospect of some sort of ceasefire in the Iran war. Markets traded accordingly, including the “doubts” part (i.e. there was an initial rebound yesterday and an additional rebound this morning). 10yr yields have now fully erased yesterday morning’s gains even though oil prices remain quite a bit lower.

Sometimes life comes down to a coin toss. Here in Virginia Beach, at the Southern Trust Mortgage Sales Summit, a conversation topic is originators not leaving their business to chance. Pricing practices are rarely left to chance, and Senator Josh Hawley (R-Mo.) sent a letter to the CEO of Fair Isaac Corporation (FICO), to inform the company of his investigation into FICO’s pricing practices in the mortgage credit scoring market. Public policy is not left to chance either, and tomorrow’s guest on Mortgage Matters at 2PM ET, presented by Lenders One, is Nicole Booth, the Head of Public Policy at Zillow Home Loans. Finally, yesterday’s bond market price action, driven by a tweet, might seem like a dice toss, but… This month’s STRATMOR piece is titled, “Mortgage Rates Are Not Random.” (Today’s podcast can be found here and this week’s ‘casts are sponsored by Quorum Federal Credit Union offering a broker outlet. Quorum empowers brokers to close more deals with flexible, high-LTV mortgage and HELOC solutions featuring up to 4 percent comp, low FICO options, and versatile programs for nearly every borrower scenario. Hear an Interview with Xactus’ Shelley Leonard and Experian’s Michele Bodda on shifts in credit scoring, opportunities to modernize data and workflows, misconceptions that slow progress, and how lenders should approach credit strategy in 2026.) Products, Services, and Software for Brokers and Lenders Less back-and-forth. More first-time-right verifications. Truework replaces manual verification waterfalls with a single automated platform, so underwriters, LOs, and ops can cut down the document chasing, conflicting numbers, and last-minute corrections. Lenders see up to 50 percent cost savings on verifications, with faster turn times, higher accuracy, and stronger R&W relief. Trusted by 4 of the top 5 lenders in the U.S., Truework gives your team verification results they can rely on. Learn more.

There were an estimated 630,000, or 46.3%, more home sellers than buyers in the United States in February, according to a Redfin report.

Eleven defendants face fraud and money laundering charges in a California case involving elderly homeowners and private lenders, prosecutors said.

The new executive order could add lender competition for self-employed borrowers, potentially via a small loan carveout and one for portfolio products.

United Wholesale Mortgage is offering revised terms. The mortgage real-estate investment trust that owns RoundPoint also received a third offer it’s considering.

The FHFA’s ACV condo insurance rollback gets the balance right between affordability and safety, even if politics muddied the waters, the chairman of Whalen Global Advisors writes.

Mortgage rates are dictated by bonds and bonds had a volatile day. During overnight trading hours, bonds suggested we should brace for the impact of even higher rates. Things changed just after 7am ET following headlines that suggested progress on the Iran war.  Although volatility continued in the ensuing hours, bonds ultimately settled in stronger territory (which is good for rates).  After ending last week above 6.5% for the first time since early September, the average top-tier 30yr fixed rate fell back to 6.49% today. While it’s a step in the right direction, it would take a much bigger improvement sustained over the course of several days (or even weeks) to mark a bigger picture turning point.

Decent Gains Amid De-Escalation Headlines

Don’t worry about what actually happened, who actually spoke to whom, and the details of the conversations that may or may not have happened. Today’s simplest fact is that the President said things that can be filed under the heading of “de-escalation” of the Iran war and markets were obviously and immediately willing to respond. It’s the response that’s encouraging-regardless of the details. By no means does this constitute the big shift we’re waiting for, but it at least suggests such a shift will be possible when the war is truly over. 

Econ Data / Events

Construction Spending

-0.2 vs 0.1 f’cast, 0.8 prev

Market Movement Recap

09:09 AM Weaker overnight then sharply stronger just after 7am on “war might end” headlines. MBS up 6 ticks (.19) and 10yr down 1.8bps at 4.366 after being as high as 4.442 just before 7am.

10:36 AM Additional gains on additional Iran negotiation headlines. MBS up nearly 3/8ths and 10yr down 3.8bps at 4.345

12:49 PM Well off highs. MBS up 5 ticks (.16) on the day and 10yr down only 1.8bps at 4.365

03:09 PM Nice recovery. MBS up 3/8ths and 10yr down 5.5bps at 4.328