Now that quantitative tightening is ending, the debate on who should be the MBS buyer of last resort, Fannie Mae and Freddie Mac, or the Fed, is taking hold

Light Volatility After Initial Losses

The first day of the new month began with some potential excitement, albeit not the good kind. A corporate bond offering from Alphabet pushed yields quickly higher just before 8am. Lackluster results in the ISM Manufacturing data helped push back in the other direction, but only briefly. The rest of the day was spent with yields drifting sideways near the AM highs, ultimately making for the weakest close since October 9th, but only modestly worse than last Thursday.

Econ Data / Events

ISM Manufacturing Employment (Oct)

46.0 vs — f’cast, 45.3 prev

ISM Manufacturing PMI (Oct)

48.7 vs 49.5 f’cast, 49.1 prev

ISM Mfg Prices Paid (Oct)

58.0 vs 61.7 f’cast, 61.9 prev

Market Movement Recap

10:11 AM Moderately weaker overnight with a modest bounce back after ISM data.  MBS still down an eighth and 10yr up 2.9bps at 4.104

01:05 PM Recovering a bit. MBS down 3 ticks (.09) and 10yr up 2.9bps at 4.105

03:43 PM Broadly sideways at slightly weaker levels.  MBS down an eighth and 10yr up 3bps at 4.106

Bonds were moderately weaker in the overnight session with most of the selling arriving at 7:56am ET when Alphabet filed for a large corporate bond offering, estimated at $15bln. Corporate bond issuance puts upward pressure on rates in several ways and there’s almost always an immediate pop when a new, large deal (like this morning’s) is announced. As a result, 10yr yields were roughly 4bps higher at the open. We saw a small rally in response to tepid ISM manufacturing data, but it doesn’t seem to be sticking.

“Daylight savings time: Is the government cutting off the bottom of a blanket and sewing it to the top and saying, ‘See? Its longer now.’” Here in Austin, TX, Texas Women Mortgage Bankers’ Fall Social and TMBA’s Housing Summit agenda are full of speakers (not from, but…) discussing the U.S. Government’s role in housing and finance, as well as our Fed. “Rob, what do hear about Lisa Cook? Is she still on the Federal Reserve’s Board?” Yes, she is still with the Fed, and the Supreme Court will hear her case, assuming we all want to follow the law, and due process. The latest comes from The Yale Journal of Regulation in an article titled, “Are Pulte’s ‘Mortgage Fraud’ Investigations Legal?” M&A is also a topic, and the deals continue: last week Carrington Mortgage Services announced it was acquiring NY’s Reliance First Capital, a cash out refinance specialist, from Tiptree, Inc. (Today’s podcast can be found here and Sponsored by ICE. As the standard for innovation, artificial intelligence, efficiency and scalability, ICE is the technology of choice for the majority of industry participants, defining the future of homeownership. Today’s features an interview with AiCR’s Joe Furlong on how intelligent document automation with complex, high-volume files can help transform your operations.) Services, Products, Software, and Tools for Lenders and Brokers Is your team fully capitalizing on the self-employed borrower segment? Business owners continue to drive demand in the Non-QM space, yet many originators are missing the mark. On Thursday, November 13 at 1PM ET / 10AM PT, Complete Guide to Non-QM: A Deep Dive on Serving Business Owners, an NMP Webinar, will give executives and originators a clear view into what the top performers are doing differently. Non-QM mentors, Jeffrey Massotti of Carrington Wholesale and Kristopher Koepke at Brokers First Funding, will share what the most successful teams in the country are doing to position themselves for success with business owner clients. Learn how to understand the mindset of the business owner, identify untapped market opportunities, and master bank statement and P&L loans with confidence. If Non-QM growth is on your radar, this is a conversation your team should not miss. Reserve your access here while seats are still available.

Up until last week’s Fed announcement, the average 30yr fixed mortgage rate was at the lowest levels in more than a year (in many cases, matching the same lows seen on September 16th–the day before the previous Fed announcement). Although these past 2 post-Fed episodes have resulted in somewhat volatile bounces, rates are still far closer to long-term lows than they are to the summertime highs. In terms of MND’s 30yr fixed index, we’re currently at 6.34% versus last week’s low of 6.13%.  Contrast that to rates just under 7% in June and 7.25% earlier this year.

Vic Lombardo, new head of mortgage services, has identified growth ideas and new revenue streams for Motto Mortgage and Wemlo, Remax CEO Erik Carlson said.

Zillow Home Loans originated 57% more purchase mortgages versus the third quarter of 2024, with production and segment revenue growth beating estimates.

The acquisition complements existing lending channels at Carrington and also adds Reliance’s full servicing portfolio to its platform, the company said.

Three Federal Reserve officials said they did not support the US central bank’s decision to cut interest rates this week, citing inflation that remains too high.

Sideways Overall Despite Hawkish Fed Speakers

Although there was some mid-day volatility (early buying followed by slower selling back to roughly unchanged territory), that movement was more in line with month-end tradeflows than any interesting, specific motivations. Nonetheless, there were interesting, specific developments in the form of several comments from several Fed speakers.  Rather than display a balanced mix of differing viewpoints, today’s crop of comments was distinctly hawkish across the board. Logan said she would have preferred to hold rates steady this week and can’t see a case for a December cut.  Hammack said it’s not clear what the right answer is for rates, but that it’s important to stay restrictive. Bostic said he was glad Powell said a December cut is far from a foregone conclusion.  And Schmid said he dissented in this week’s vote due to economic momentum and inflation concerns. While bonds didn’t react to this today, the lopsided hawkishness makes for an interesting 6 weeks of data-watching ahead of the next Fed meeting and dot plot.

Market Movement Recap

09:44 AM A hair weaker overnight, but gaining ground since the open.  MBS up 5 ticks (.16) and 10yr down 1bp at 4.086

11:43 AM MBS up 2 ticks (.06) on the day but down an eighth from the AM highs.  10yr now up 0.2bps at 4.097

12:29 PM MBS down 6 ticks from highs (.19) and 1 tick on the day. 10yr up 0.4bps at 4.099

03:17 PM MBS down 7 ticks (.22) from highs and 2 ticks (.06) on the day.  10yr unchanged at 4.094