13th September, 24
Fed Week Uncertainty Makes For Logical Consolidation
Fed Week Uncertainty Makes For Logical Consolidation Bonds rallied sharply just over a month ago following a downbeat jobs report and other data. They then consolidated ahead of the early September data before rallying just a bit more. The present week didn't add much to the broader context and thus presented a good opportunity for another consolidation ahead of a week that's sure to spark some volatility. Friday's only hope was Consumer Sentiment and it was not up to the task of raising any heart rates. Bonds began the day in modestly stronger territory and are going out the door at almost the exact same levels. Econ Data / Events Consumer Sentiment 69.0 vs 68.0 f'cast, 67.9 prev 1yr inflation expectations 2.7 vs 2.8 f'cast, 2.8 prev Market Movement Recap 10:30 AM Slightly stronger overnight and giving back some gains in AM hours. MBS still up 1 tick (.03) and 10yr down 1.1bps at 3.664. 12:55 PM Bouncing back into positive territory into the PM hours. MBS up an eighth and 10yr down 2.6bps at 3.649 02:31 PM New highs for MBS, up 5 ticks (.16). 10yr down 2.9bps at 3.645
Fed Week Uncertainty Makes For Logical Consolidation
Fed Week Uncertainty Makes For Logical Consolidation Bonds rallied sharply just over a month ago following a downbeat jobs report and other data. They then consolidated ahead of the early September data before rallying just a bit more. The present week didn't add much to the broader context and thus presented a good opportunity for another consolidation ahead of a week that's sure to spark some volatility. Friday's only hope was Consumer Sentiment and it was not up to the task of raising any heart rates. Bonds began the day in modestly stronger territory and are going out the door at almost the exact same levels. Econ Data / Events Consumer Sentiment 69.0 vs 68.0 f'cast, 67.9 prev 1yr inflation expectations 2.7 vs 2.8 f'cast, 2.8 prev Market Movement Recap 10:30 AM Slightly stronger overnight and giving back some gains in AM hours. MBS still up 1 tick (.03) and 10yr down 1.1bps at 3.664. 12:55 PM Bouncing back into positive territory into the PM hours. MBS up an eighth and 10yr down 2.6bps at 3.649 02:31 PM New highs for MBS, up 5 ticks (.16). 10yr down 2.9bps at 3.645
13th September, 24
Low Volatility in Mortgage Rates, But Next Week Could be Very Different
We've talked a lot about why the Fed rate cut will have no additional positive impact on mortgage rates next week. Everything the market can already reasonably foresee about what the Fed might do is already reflected in today's mortgage rates. In other words, much of the sharp mortgage rate decline seen in recent months is simply a reflection of the growing odds for lower Fed Funds Rates in the near-term future. But while a Fed rate cut doesn't guarantee lower mortgage rates, the info that comes out on Fed day can still cause tremendous volatility. In this particular case, one reason is that the market is fairly evenly split on whether the Fed will cut by 0.25% or 0.50%. Either way, half of the market will be surprised and that's a recipe for volatility. In addition, there are other documents released concurrently with the rate announcement that can cause rapid movement in longer term interest rates for better or worse. That happens at 2pm ET on Wednesday afternoon. 30 minutes later, Fed Chair Powell will field questions from reporters--another Fed day event with the potential to send rates in either direction. By the time all is said and done, we may have seen several back-and-forth moves on Wednesday. Volatility could continue into Thursday, but while mortgage rates could definitely end up being noticeably higher or lower by the end of the week, the bigger changes in the bigger picture would depend on the most closely-watched economic data due out in the first week of October.
Low Volatility in Mortgage Rates, But Next Week Could be Very Different
We've talked a lot about why the Fed rate cut will have no additional positive impact on mortgage rates next week. Everything the market can already reasonably foresee about what the Fed might do is already reflected in today's mortgage rates. In other words, much of the sharp mortgage rate decline seen in recent months is simply a reflection of the growing odds for lower Fed Funds Rates in the near-term future. But while a Fed rate cut doesn't guarantee lower mortgage rates, the info that comes out on Fed day can still cause tremendous volatility. In this particular case, one reason is that the market is fairly evenly split on whether the Fed will cut by 0.25% or 0.50%. Either way, half of the market will be surprised and that's a recipe for volatility. In addition, there are other documents released concurrently with the rate announcement that can cause rapid movement in longer term interest rates for better or worse. That happens at 2pm ET on Wednesday afternoon. 30 minutes later, Fed Chair Powell will field questions from reporters--another Fed day event with the potential to send rates in either direction. By the time all is said and done, we may have seen several back-and-forth moves on Wednesday. Volatility could continue into Thursday, but while mortgage rates could definitely end up being noticeably higher or lower by the end of the week, the bigger changes in the bigger picture would depend on the most closely-watched economic data due out in the first week of October.
13th September, 24
Partnering Companies Sought; Direct Non-Agency Buyer; Qualification Tool; Upcoming In-Person Conferences
“I pay you to handle my loan and give me a good program with a competitive rate, not predict things you can’t.” At a recent event, a top originator told me that a borrower stated that. I continue to see LOs of all types (bank, credit union, IMB, broker, DTC, whatever) keep an eye on mortgage rates, and know what they’re doing, but focus on service and products, things that they or their company can control. Sure, everyone is predicting that the Federal Reserve’s Open Market Committee (FOMC) will lower rates next week; it’ll be no surprise. What will be interesting are the thoughts by the various Fed district presidents who make up the Committee. Meanwhile, LOs are treating borrowers like prospects, making a difference in their client’s lives, and remembering that they are offering money, not mortgages. (Today’s podcast is found here and Sponsored by Richey May. Richey May’s consulting, cybersecurity, business intelligence, and automation services are designed by mortgage experts to help you continue to drive growth and increase profitability. Hear an interview with Candor’s Ed Kourany on current trends in the mortgage industry, from lender employment to repurchase data and more.) Lender and Broker Software, Services, and Loan Programs Register now for the 2024 Loan Vision Innovation Conference in Chicago, September 23-25! Tailored for financial leaders in IMBs, banks, and credit unions, this event is your key to staying ahead in the competitive financial landscape. LVIC24 offers a unique opportunity to gain the insights and tools you need to drive growth and efficiency within your organization. Learn from mortgage industry titans like Michael Fratantoni, Rob Chrisman, and others through sessions focused on profitability, sustainability, and industry best practices. Enjoy enhanced networking opportunities, including the Opening Dinner + Awards Ceremony and an Evening on the Chicago River.
Partnering Companies Sought; Direct Non-Agency Buyer; Qualification Tool; Upcoming In-Person Conferences
“I pay you to handle my loan and give me a good program with a competitive rate, not predict things you can’t.” At a recent event, a top originator told me that a borrower stated that. I continue to see LOs of all types (bank, credit union, IMB, broker, DTC, whatever) keep an eye on mortgage rates, and know what they’re doing, but focus on service and products, things that they or their company can control. Sure, everyone is predicting that the Federal Reserve’s Open Market Committee (FOMC) will lower rates next week; it’ll be no surprise. What will be interesting are the thoughts by the various Fed district presidents who make up the Committee. Meanwhile, LOs are treating borrowers like prospects, making a difference in their client’s lives, and remembering that they are offering money, not mortgages. (Today’s podcast is found here and Sponsored by Richey May. Richey May’s consulting, cybersecurity, business intelligence, and automation services are designed by mortgage experts to help you continue to drive growth and increase profitability. Hear an interview with Candor’s Ed Kourany on current trends in the mortgage industry, from lender employment to repurchase data and more.) Lender and Broker Software, Services, and Loan Programs Register now for the 2024 Loan Vision Innovation Conference in Chicago, September 23-25! Tailored for financial leaders in IMBs, banks, and credit unions, this event is your key to staying ahead in the competitive financial landscape. LVIC24 offers a unique opportunity to gain the insights and tools you need to drive growth and efficiency within your organization. Learn from mortgage industry titans like Michael Fratantoni, Rob Chrisman, and others through sessions focused on profitability, sustainability, and industry best practices. Enjoy enhanced networking opportunities, including the Opening Dinner + Awards Ceremony and an Evening on the Chicago River.
13th September, 24
No Impact From Consumer Sentiment
Today's only potentially relevant economic data was the 10am Consumer Sentiment data. This report comes out twice a month, once in "preliminary" form earlier in the month and then in "final" form 2 weeks later. The first release is typically the only shot for a noticeable market reaction as the "final" tends to be well-telegraphed by the first release. Despite that fact, today's preliminary release was a non-event with headline sentiment coming in close to consensus and 1-year inflation expectations ticking down 0.1%. With that, bonds continue the process of quietly consolidating in the lower middle portion of this week's range. Most of the movement at the end of the week has been in Fed Funds Futures and the shortest term Treasury yields. The catalyst was a WSJ article discussing the possibility of a 25bp vs 50bp rate cut next week. The fact that Timiraos is writing on the possibility of 50bp is being taken by some market participants as foreshadowing, even though everyone else is also talking about 25bp vs 50bp in various ways.
No Impact From Consumer Sentiment
Today's only potentially relevant economic data was the 10am Consumer Sentiment data. This report comes out twice a month, once in "preliminary" form earlier in the month and then in "final" form 2 weeks later. The first release is typically the only shot for a noticeable market reaction as the "final" tends to be well-telegraphed by the first release. Despite that fact, today's preliminary release was a non-event with headline sentiment coming in close to consensus and 1-year inflation expectations ticking down 0.1%. With that, bonds continue the process of quietly consolidating in the lower middle portion of this week's range. Most of the movement at the end of the week has been in Fed Funds Futures and the shortest term Treasury yields. The catalyst was a WSJ article discussing the possibility of a 25bp vs 50bp rate cut next week. The fact that Timiraos is writing on the possibility of 50bp is being taken by some market participants as foreshadowing, even though everyone else is also talking about 25bp vs 50bp in various ways.
12th September, 24
Modest Resistance, But No Big Bad Correction
Modest Resistance, But No Big Bad Correction Unless Friday's Consumer Sentiment data manages to surprise in some completely unprecedented way, bonds have made it through the week of economic reports and Treasury auctions without looking any worse for the wear. Thursday saw a small amount of ground conceded, but not enough to move yields back up in to last week's range. The initial reaction to the 8:30am data was actually slightly positive for bonds. Selling came later, suggesting sellers had other motivations. The recovery in the afternoon was concentrated in the shorter end of the yield curve following an article by WSJ's Timiraos discussing a 25bp vs 50bp Fed rate cut. Econ Data / Events Jobless Claims 230k vs 230k f'cast, 227k prev Core PPI MM 0.3 vs 0.2 f'cast, -0.2 prev Core PPY YY 2.4 vs 2.5 f'cast, 2.4 prev Market Movement Recap 08:54 AM Roughly unchanged overnight and a hair stronger after data. MBS up 2 ticks (.06) and 10yr down 0.7bps at 3.647 01:13 PM weakest levels just after noon, but off the lows now. MBS down an eighth and 10yr up 4.2 bps at 3.696 02:55 PM MBS now down only 1 tick (.03) and 10yr up 2.7bps at 3.681
Modest Resistance, But No Big Bad Correction
Modest Resistance, But No Big Bad Correction Unless Friday's Consumer Sentiment data manages to surprise in some completely unprecedented way, bonds have made it through the week of economic reports and Treasury auctions without looking any worse for the wear. Thursday saw a small amount of ground conceded, but not enough to move yields back up in to last week's range. The initial reaction to the 8:30am data was actually slightly positive for bonds. Selling came later, suggesting sellers had other motivations. The recovery in the afternoon was concentrated in the shorter end of the yield curve following an article by WSJ's Timiraos discussing a 25bp vs 50bp Fed rate cut. Econ Data / Events Jobless Claims 230k vs 230k f'cast, 227k prev Core PPI MM 0.3 vs 0.2 f'cast, -0.2 prev Core PPY YY 2.4 vs 2.5 f'cast, 2.4 prev Market Movement Recap 08:54 AM Roughly unchanged overnight and a hair stronger after data. MBS up 2 ticks (.06) and 10yr down 0.7bps at 3.647 01:13 PM weakest levels just after noon, but off the lows now. MBS down an eighth and 10yr up 4.2 bps at 3.696 02:55 PM MBS now down only 1 tick (.03) and 10yr up 2.7bps at 3.681
12th September, 24
Mortgage Rates Move Slightly Higher For First Time This Month
While it's true that there have only been 8 business days so far this month, it's also true that today is the only one of the 8 where mortgage rates haven't been lower than the previous day for the average lender. That's the bad news. The good news is that today's increase was modest. In fact, if you take yesterday out of the equation the average lender's conventional 30yr fixed rates are easily at the the lowest levels since February 2023. That's a drop of more than .75% in just over a month, which is a quick pace of improvement. It's also part of the longest trend of rate improvement in more than 3 years. Many times, when it comes to movement in financial markets, "too much of a good thing" means you might see the opposite of that thing--at least to some extent. That's certainly a possibility, but it depends on incoming economic data and the market's reaction to the Fed's rate outlook next week. NOTE: we're not as interested in the Fed's rate cut because that part of the policy shift is already reflected in today's interest rates. Rather, if the Fed communicates a more aggressive rate cut outlook in the upcoming months, rates could continue lower. Conversely, if the rate cut outlook underwhelms, there's room for rates to bounce back up and hold steady until the next major round of economic data.
Mortgage Rates Move Slightly Higher For First Time This Month
While it's true that there have only been 8 business days so far this month, it's also true that today is the only one of the 8 where mortgage rates haven't been lower than the previous day for the average lender. That's the bad news. The good news is that today's increase was modest. In fact, if you take yesterday out of the equation the average lender's conventional 30yr fixed rates are easily at the the lowest levels since February 2023. That's a drop of more than .75% in just over a month, which is a quick pace of improvement. It's also part of the longest trend of rate improvement in more than 3 years. Many times, when it comes to movement in financial markets, "too much of a good thing" means you might see the opposite of that thing--at least to some extent. That's certainly a possibility, but it depends on incoming economic data and the market's reaction to the Fed's rate outlook next week. NOTE: we're not as interested in the Fed's rate cut because that part of the policy shift is already reflected in today's interest rates. Rather, if the Fed communicates a more aggressive rate cut outlook in the upcoming months, rates could continue lower. Conversely, if the rate cut outlook underwhelms, there's room for rates to bounce back up and hold steady until the next major round of economic data.
12th September, 24
MSR, Servicing, QC, Productivity Products; CFPB Fines TD Bank $28 Million on Credit Issues
“Honey, what did you do today?” “Well…” People do some cockamamie stuff against all odds. What are the odds of a lender or LO retaining their client after the loan has been brokered out or the servicing’s been sold? UWM released KEEP, “an industry-leading technology that utilizes AI to send pre-validated refinance opportunities as soon as a borrower is able to obtain meaningful savings on their monthly payment.” (More below.) “Rob, I recently interviewed at a broker shop that, as it turns out, is sending over 95 of its loans to one wholesaler. What are the odds? Does that sound right to you?” Many will argue that a broker’s duty is to shop multiple wholesalers for every loan, knowing that one company is not going to have the best product, price, and service every day for every client. Or even near that. Therefore, if indeed 95 percent were sent to one wholesaler, that would defy all the odds. What do you think the odds are that every home builder out there employs immigrants of one size & shape or another? I’d say 100 percent. Hate to be the bearer of bad news, but every construction company uses immigrants to build America. Some will claim that they literally have built America. (Today’s podcast is found here and Sponsored by Richey May. Richey May’s consulting, cybersecurity, business intelligence, and automation services are designed by mortgage experts to help you continue to drive growth and increase profitability. Hear an interview with LodeStar's Alayna Gardner, AMP, on how her podcast (Lending Leaders) and other conversation-based content focused on thought leadership is ushering in a new era of content marketing.)
MSR, Servicing, QC, Productivity Products; CFPB Fines TD Bank $28 Million on Credit Issues
“Honey, what did you do today?” “Well…” People do some cockamamie stuff against all odds. What are the odds of a lender or LO retaining their client after the loan has been brokered out or the servicing’s been sold? UWM released KEEP, “an industry-leading technology that utilizes AI to send pre-validated refinance opportunities as soon as a borrower is able to obtain meaningful savings on their monthly payment.” (More below.) “Rob, I recently interviewed at a broker shop that, as it turns out, is sending over 95 of its loans to one wholesaler. What are the odds? Does that sound right to you?” Many will argue that a broker’s duty is to shop multiple wholesalers for every loan, knowing that one company is not going to have the best product, price, and service every day for every client. Or even near that. Therefore, if indeed 95 percent were sent to one wholesaler, that would defy all the odds. What do you think the odds are that every home builder out there employs immigrants of one size & shape or another? I’d say 100 percent. Hate to be the bearer of bad news, but every construction company uses immigrants to build America. Some will claim that they literally have built America. (Today’s podcast is found here and Sponsored by Richey May. Richey May’s consulting, cybersecurity, business intelligence, and automation services are designed by mortgage experts to help you continue to drive growth and increase profitability. Hear an interview with LodeStar's Alayna Gardner, AMP, on how her podcast (Lending Leaders) and other conversation-based content focused on thought leadership is ushering in a new era of content marketing.)
12th September, 24
Mixed Bag of Econ Data. Mixed Market Reaction. Rally Looking Tired
Thursday brings this week's last opportunity for the market to react to moderately important economic data before next week's Fed announcement. So far, it looks like fireworks are not on the menu. Heavy lifting was left to only two reports: Jobless Claims and PPI. Neither are true top tier reports, but both are capable of causing a reaction. Today's installments didn't swing for the fences. Claims were flat and PPI was a mixed bag with a higher reading for August offset by a bigger downward revision to July. The market reaction was stronger at first, but is turning weaker as the morning progresses. The bigger issue is that this makes the bigger-picture rally look a bit tired, or at least like it's consolidating ahead of next week's unavoidable breakout.
Mixed Bag of Econ Data. Mixed Market Reaction. Rally Looking Tired
Thursday brings this week's last opportunity for the market to react to moderately important economic data before next week's Fed announcement. So far, it looks like fireworks are not on the menu. Heavy lifting was left to only two reports: Jobless Claims and PPI. Neither are true top tier reports, but both are capable of causing a reaction. Today's installments didn't swing for the fences. Claims were flat and PPI was a mixed bag with a higher reading for August offset by a bigger downward revision to July. The market reaction was stronger at first, but is turning weaker as the morning progresses. The bigger issue is that this makes the bigger-picture rally look a bit tired, or at least like it's consolidating ahead of next week's unavoidable breakout.
11th September, 24
Does Today's Inflation Data Change Anything?
Does Today's Inflation Data Change Anything? Bonds initially sold off following the higher-than-expected core CPI reading this morning. Shelter inflation spiked back to troubling territory as well--something that was perhaps an even bigger problem for bonds. Nonetheless, bonds moved back to stronger territory in short order. The only lingering damage was to the Fed's rate cut outlook for next week. Markets were already squarely in the 25bp camp, but today's data went a long way toward sealing the deal. When it comes to the longer term rate outlook, today means nothing. The Fed and financial markets would be hypocritical if they allowed one inflation report to materially alter the outlook. Market Movement Recap 09:39 AM Slightly stronger overnight then modestly weaker after CPI. MBS down 3 ticks (.09) and 10yr up 1.9bps at 3.665 10:41 AM Back into stronger territory now with MBS up 2 ticks (.06) and 10yr down 2.4bps at 3.622 01:03 PM bonds were weaker into the 10yr auction and remain just barely weaker despite stronger results. 10yr up 1bp at 3.655 and MBS down 3 ticks (.09). 03:26 PM Back to 'unchanged' now with MBS actually up 1 tick (.03) and 10yr up only 0.3bs at 3.649
Does Today's Inflation Data Change Anything?
Does Today's Inflation Data Change Anything? Bonds initially sold off following the higher-than-expected core CPI reading this morning. Shelter inflation spiked back to troubling territory as well--something that was perhaps an even bigger problem for bonds. Nonetheless, bonds moved back to stronger territory in short order. The only lingering damage was to the Fed's rate cut outlook for next week. Markets were already squarely in the 25bp camp, but today's data went a long way toward sealing the deal. When it comes to the longer term rate outlook, today means nothing. The Fed and financial markets would be hypocritical if they allowed one inflation report to materially alter the outlook. Market Movement Recap 09:39 AM Slightly stronger overnight then modestly weaker after CPI. MBS down 3 ticks (.09) and 10yr up 1.9bps at 3.665 10:41 AM Back into stronger territory now with MBS up 2 ticks (.06) and 10yr down 2.4bps at 3.622 01:03 PM bonds were weaker into the 10yr auction and remain just barely weaker despite stronger results. 10yr up 1bp at 3.655 and MBS down 3 ticks (.09). 03:26 PM Back to 'unchanged' now with MBS actually up 1 tick (.03) and 10yr up only 0.3bs at 3.649
11th September, 24
Mortgage Rates Lowest Since February 2023
Mortgage rates moved lower again today despite a key inflation report coming in higher than expected. This is counterintuitive for anyone who's been following rate movement closely over the past few years. During that time, inflation reports have had a strong, direct connection to mortgage rate volatility with higher inflation begetting higher rates and vice versa. But as we discussed yesterday, the prominent role of inflation data is fading to that of a supporting actor. It is now the labor market that is almost always on center stage. It's not that inflation doesn't matter or that it couldn't matter again in the future. Rather, it's just that today's Consumer Price Index (CPI) was only one report. It would have been unable to undo the net impact from the past 3 CPI reports which all conveyed significant progress toward the Fed's 2.0% annual inflation target (in fact, if you asked just those 3 reports, we're already below 2.0% annually). Despite all of the above, the bond market (which dictates rates) still gyrated a bit this morning. It simply wasn't enough to derail the mortgage rate improvements. Many lenders were relieved to see an absence of negative backlash. Their pricing improvements suggested they had been waiting to see how today's data would impact the market. Do note, however, that some lenders improved rates yesterday afternoon and are not much better today. Also note that due to the structure of the underlying market for mortgage backed securities, there are certain pricing advantages at rates that end in .125% and .625%. As such, when broad national averages (i.e. "best case scenarios") approach 6.125%, there can be larger-than-normal swings in that direction that won't readily apply to loan scenarios at higher rates.
Mortgage Rates Lowest Since February 2023
Mortgage rates moved lower again today despite a key inflation report coming in higher than expected. This is counterintuitive for anyone who's been following rate movement closely over the past few years. During that time, inflation reports have had a strong, direct connection to mortgage rate volatility with higher inflation begetting higher rates and vice versa. But as we discussed yesterday, the prominent role of inflation data is fading to that of a supporting actor. It is now the labor market that is almost always on center stage. It's not that inflation doesn't matter or that it couldn't matter again in the future. Rather, it's just that today's Consumer Price Index (CPI) was only one report. It would have been unable to undo the net impact from the past 3 CPI reports which all conveyed significant progress toward the Fed's 2.0% annual inflation target (in fact, if you asked just those 3 reports, we're already below 2.0% annually). Despite all of the above, the bond market (which dictates rates) still gyrated a bit this morning. It simply wasn't enough to derail the mortgage rate improvements. Many lenders were relieved to see an absence of negative backlash. Their pricing improvements suggested they had been waiting to see how today's data would impact the market. Do note, however, that some lenders improved rates yesterday afternoon and are not much better today. Also note that due to the structure of the underlying market for mortgage backed securities, there are certain pricing advantages at rates that end in .125% and .625%. As such, when broad national averages (i.e. "best case scenarios") approach 6.125%, there can be larger-than-normal swings in that direction that won't readily apply to loan scenarios at higher rates.