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Mortgage rates are tied to movement in the bond market and bonds were close enough to Friday’s levels that mortgage rates were essentially unchanged today. This keeps the average lender in the lower portion of the narrow range seen over the past 4 months.  If rates manage to move noticeably lower from here, they’ll be challenging the lowest levels in more than 3 years. Meaningful momentum may be hard to come by over the next 2 weeks. During that time, the bond market will be fully closed for 2 days, partially closed on 2 days, and much lighter in volume and participation for the rest of the time. This can lead to random, small-scale volatility but it rarely results in lasting momentum. For that, we’ll be waiting until the major econ data begins coming out in January–most notably the Jan 9th jobs report.

2025 is effectively over when it comes to meaningful shifts in the bond market. The coming days will be so heavily-affected by light volume/liquidity that any apparently significant shifts would be taken with a grain of salt anyway. Even as we look back over the past 4 months, we see a persistence of the very narrow 4.00-4.20 range in 10yr yields. The past 3 weeks have been especially narrow.

 While the recent micro range in 10s is on the high side of the broader range, this has more to do with shifts in the yield curve. For instance, 2yr yields are hugging the lower end of their 4-month range.

MBS and mortgage rates are somewhere in between, which is why they’ve been outperforming 10yr yields relative to the highs/lows of their respective ranges.

The Massachusetts Democrat requested to see records related to second liens that banks were required to expunge per terms of the 2012 mortgage settlement.

The move formalizes acting leadership roles both have had in different segments of the government-backed mortgage market serving many first-time homebuyers.

More than 80% of mortgage brokers expect business to grow in 2026, mainly through the strengthening of referral networks and the expansion of non-QM offerings.

Existing-home sales in the US barely rose in November, as a recent moderation in price growth and mortgage rates motivated buyers at the margin.

Monthly excess spread will confer credit enhancement to the notes, KBRA said, and while it will be released it will not be available as credit enhancement in future payment periods.

It ended up being a fairly uneventful day for mortgage rates despite scattered speculation about the impact of foreign monetary policy decisions. The average lender nudged just a hair higher, resulting in the 2nd lowest reading of the week. Apart from yesterday, the last day with lower rates was more than 2 weeks ago on December 4th. The coming week will be heavily affected by the realities of the holiday trading environment. There’s no repeatable formula for this. We simply widen the range of potential rate movement that occurs for no apparent reason. Most of the time, rates simple drift aimlessly sideways, but on certain years, there are  inexplicable jumps/dips. We won’t have a solid sense of where the rate market wants to be until the important economic reports start coming out in January.

Bond Market in Holiday Mode

Holiday mode is impossible to clearly define when it comes to its impact on the bond market. We know it when we see it, and we saw it today. Bonds paid no attention to econ data no matter how much it may seem that the 10am Consumer Sentiment numbers had an impact. Movement was minimal and not visibly tied to any other motivation. And as we already discussed this morning, Japan’s rate hike was a non-event. Holiday trading randomness will get worse over the next 2 weeks before it improves in early January.

Econ Data / Events

Consumer Sentiment (Dec)

52.9 vs 53.4 f’cast, 51.0 prev

Existing home sales (Nov)

4.13M vs 4.2M f’cast, 4.1M prev

Sentiment: 1y Inflation (Dec)

4.2% vs 4.1% f’cast, 4.5% prev

Sentiment: 5y Inflation (Dec)

3.2% vs 3.2% f’cast, 3.4% prev

U Mich conditions (Dec)

50.4 vs 50.7 f’cast, 51.1 prev

Market Movement Recap

10:12 AM Sideways at modestly weaker levels. MBS down 2 ticks (.06) and 10yr up 2.1bps at 4.143

12:15 PM Decent recovery into 11am, but fading a bit now.  MBS down 3 ticks (.09) and 01yr up 2.7bps at 4.148