Members whose districts include Altadena and Pacific Palisades are behind the measure, which calls for an initial 180-day forbearance period.

Uneventful Fed Day, Bonds Eventually Agree

There’s never a way to know with certainty that a Fed announcement will be uneventful, but if we had to assign relative probabilities, today’s looked much more likely than normal to pass without a trace. In the immediate wake of the announcement, that didn’t look like it was going to happen. Bonds sold quickly due to what seemed to be a notable verbiage change.  Then in the press conference, Powell clarified the verbiage change and bonds unwound their initial reaction. MBS and Treasuries thus ended the day perfectly in line with pre-Fed levels, like it never even happened.  

Market Movement Recap

10:17 AM Modestly stronger overnight and flat so far.  MBS up 2 ticks (.06) and 10yr down 1.1bps at 4.523

11:20 AM Into negative territory now.  10yr up half a bp at 4.54 and MBS down 1 tick (.03).

02:43 PM Initially weaker after Fed announcement, but recovering a bit during press conference.  MBS down an eighth and 10yr up 3.3bps at 4.568

The bank anticipates recent changes will help it rebound soon from a quarter in which commercial-loan distress grew and a sale of the company fell apart.

Nearly two-thirds of Americans said stubbornly high mortgage rates are keeping them from moving, so they are planning to fix up their homes, Angi found.

A presidential memo on Monday imposed a pause on certain types of government funding until programs are reviewed to ensure compliance with Trump executive orders.

The FEMA-operated program has over 4.7 million policies in force, and lawmakers have kept it intact via dozens of short-term extensions since 2017.

On an annual basis, home prices grew by 4.2% in November, FHFA’s index found.

The average mortgage lender remained right in line with yesterday’s levels despite a bit of weakness in the bond market.  Lenders who improved their rates yesterday afternoon were slightly higher.  Others were slightly lower.  This is a solid outcome considering the market motivations over the past 2 days.  Specifically, rates moved in concert with stocks yesterday as NVDA led a substantial sell-off.  Stocks bounced back today, and have now recovered most of the damage from yesterday morning.  Rates, meanwhile, haven’t followed the correction today. The 2nd half of the week bring a higher concentration of calendar events with the potential to influence rates. At 2pm ET, the Federal Reserve releases its latest rate announcement. There is effectively no chance of a rate change at this meeting, nor is it likely the Fed would change much about the statement itself. That leaves Powell’s 2:30pm press conference as the sole source of potential volatility in the afternoon. On that note, this is one of those Fed meetings where it wouldn’t be a surprise to see a minimal reaction even though one should never rule out a bigger reaction on a Fed day. 

Both S&P Case-Shiller and the FHFA released national home price indices this morning. In both cases, November’s prices were slightly higher than expected.  For the Case Shiller data, this meant that prices declined less than expected. Unlike FHFA prices, Case Shiller is NOT seasonally adjusted–something that is immediately apparent when viewing a month-to-month chart. November is frequently near the low point of any given year for price appreciation. This month’s 0.1% decline is an improvement from October’s 0.2% decline or the 0.3% drop from last November. Regionally, Boston and New York were top performers in November, but only NY and Chicago were over 6% year over year. As seen in the table above and the chart below, prices are easily in positive territory in year-over-year terms.  The same is true for FHFA, which is seeing almost the exact same change as Case Shiller.  In addition, both indices have been fairly flat in the low 4% range recently.

Not Expecting Fireworks From The Fed

Bonds had a mixed reaction to this morning’s Durable Goods data with stronger internals offsetting a weaker headline. Sellers were in control for most of the AM hours, but momentum shifted with the 7yr Treasury auction. All in all, it was a solid showing in spite of the rebound in equities markets (something we only care about today because it was a huge consideration yesterday). Looking ahead, tomorrow’s only notable agenda item is the Powell press conference at 2:30pm. The announcement itself can’t really offer any tradeable news.  Even Powell would be hard pressed to shake things up too much considering the mildly positive cue from inflation data and the ongoing policy uncertainty as a counterbalance.  That said, one can never truly rule out a volatile reaction to a Powell presser, but the odds are certainly lower this time around.

Econ Data / Events

Durable Goods

-2.2 vs 0.8 f’cast, -2.0 prev

Durables excluding defense and aircraft

0.5 vs 0.3 f’cast, 0.9 prev

Consumer Confidence

104.1 vs 105.6 f’cast, 109.5 prev

Market Movement Recap

08:41 AM Slightly weaker overnight and little-changed after Durable Goods data.  MBS down 2 ticks (.06) and 10yr up 2.8bps at 4.566

10:57 AM Back near weakest levels as stocks rebound.  MBS down an eighth and 10yr up 3.5bps at 4.574

01:43 PM Stronger after 7yr Treasury auction.  MBS unchanged. 10yr up 1.6bps at 4.554