Fed Minutes Push Yields Higher
As expected, the recent raft of hawkish Fed speakers foreshadowed (whether intentionally or coincidentally) a hawkish message in today's Fed minutes. At issue: "many" meeting participants felt that a December cut would NOT likely be justified as opposed to "several" who disagreed. This was compounded by the fact that BLS rescheduled the early December jobs report for 12/16/25--6 days after the December Fed meeting. In other words, there won't be any employment data that would help the Fed justify a cut next month. Fed Funds futures agreed with a spike in implied yields immediately following the BLS news. Longer-term bonds followed suit after the Fed Minutes.
Econ Data / Events
ADP Weekly Payrolls
-2.5k vs -11.25k prev
Jobless Claims (October 18th)
232k vs 223k f'cast, 219k prev
Factory Orders
1.4 vs 1.4 f'cast, -1.3 prev
Builder Confidence
38 vs 37 f'cast, 37 prev
Core Durable Goods (Aug)
0.4 vs 0.6 f'cast/prev
Market Movement Recap
10:02 AM Slightly stronger overnight, but losing ground since 9:30am NYSE open. MBS unchanged and 10yr up 1.1bps at 4.12
11:01 AM Bouncing back from AM weakness. MBS up 1 tick and 10yr up 0.9bps at 4.118
02:13 PM no reaction to Fed Minutes. MBS unchanged and 10yr down 0.4bps at 4.106
02:43 PM Weakest levels of the day for MBS, down 2 ticks (.06). 10yr up 1.3bps at 4.123
04:18 PM Heading out near weakest levels. MBS down 3 ticks (.09) and 10yr up 1.9bps at 4.128
It was a complicated day for mortgage rates. Officially, at the time of this article, the average top tier 30yr fixed rate is a hair lower than it was yesterday. But rates are based on bonds and bonds are telling a different story. In the wake of the release of the minutes from the most recent Fed meeting, bonds lost ground. This implies higher rates. The only reason it hasn't resulted in higher rates today is timing. Specifically, the bond market losses just happened and most lenders have not yet made any adjustments. The implication is that tomorrow morning's rates would be higher than they are today assuming bonds don't change between now and then. An additional layer of complication is that we'll receive the September jobs report at 8:30am ET tomorrow. Because most mortgage lenders publish their rates between 9:30and 10:30am ET, this means there will be another source of probably volatility to digest before rates come out. Bottom line: if tomorrow morning's jobs data is much stronger than expected, rates would be quite a bit higher. But if the jobs report is weaker, it could offset the bond market losses seen this afternoon, thus keeping rates relatively unchanged.
As I type these words, I am sitting in front of one of Chuck Berry’s early residences in St. Louis. STL has a good musical reputation, a fine mortgage association, a Fed that puts out great research, and has many nice neighborhoods. But to call this specific area where I am sitting a “transitional” neighborhood would be generous. Although there is potential, nearly every house standing could use an immense amount of work, and the residents probably aren’t regulars at home improvement stores. In fact, across the nation people aren’t rushing off to specifically Home Depot, either because of consumers slowing down or because people are boycotting it and view it as a “threat to democracy.” Strange times. Indeed, HD missed earnings estimates and took down its forecast for the fourth quarter, either because of consumer uncertainty or because consumers are going elsewhere. In other trends, how’s your companies loan products for cities? A new study shows that 80 percent of the world’s population now lives in urban areas, like St. Louis and Kansas City. (Today’s podcast can be found here and this week’s are sponsored by Figure. Figure is shaking up the lending world with their five-day HELOC, offering borrower approvals in as little as five minutes and funding in five days. And, embedding their technology is easy. Hear an interview with HomeLight’s Nick Friedman on lender sentiment heading into 2026, with optimism rising and new buyer behaviors taking shape that could reshape the housing market.)
Correlation between stocks and bonds is hit and miss depending on other factors. Before the age of more aggressive Fed intervention, it was more common to see yields move in concert with stocks. These days, Fed accommodation expectations can result in the opposite correlation. That said, there are still times when the old school "stock lever" is in full effect and this morning is one of them. It's been particularly noticeable since the 9:30am NYSE open as a recovery in stocks is apparently sapping the safe haven demand for Treasuries seen earlier in the week. Afternoon volatility potential is focused on the 2pm ET release of the Fed Minutes.
Modest Gains After Mid-Day Volatility
With only a few exceptions, bonds have been a rudderless ship during the government shutdown. With the backlogged data returning in a slow and uncertain fashion, rudder repairs are similarly slow. In today's case, bonds benefited from overnight strength in overseas bond markets and a bit of ongoing weakness in stocks. The surprise release of stale jobless claims data did nothing to inspire and there was limited benefit from another negative print in the weekly ADP numbers. As soon as EU bonds closed for the day, US bonds began selling off. The damage was short-lived and well contained. The net effect was another in-range day ahead of higher consequence events like Wednesday's Fed minutes or Thursday's jobs report.
Econ Data / Events
ADP Weekly Payrolls
-2.5k vs -11.25k prev
Jobless Claims (October 18th)
232k vs 223k f'cast, 219k prev
Factory Orders
1.4 vs 1.4 f'cast, -1.3 prev
Builder Confidence
38 vs 37 f'cast, 37 prev
Core Durable Goods (Aug)
0.4 vs 0.6 f'cast/prev
Market Movement Recap
09:56 AM Stronger overnight with some additional gains after ADP data. MBS up 6 ticks (.19) and 10yr down 4.8 bps at 4.091
11:39 AM MBS up 3 ticks (.09) but down an eighth from AM highs. 10yr down 1.5bps at 4.125 but up 4bps from AM lows.
04:18 PM Off the weakest levels. MBS up an eighth and 10yr down 2bps at 4.119
Watching Rates
Check our some recent articles and posts about current rates.
It was a complicated day for mortgage rates. Officially, at the time of this article, the average top tier 30yr fixed rate is a hair lower than it was yesterday. But rates are based on bonds and bonds are telling a different story. In the wake of the release of the minutes from the most recent Fed meeting, bonds lost ground. This implies higher rates. The only reason it hasn't resulted in higher rates today is timing. Specifically, the bond market losses just happened and most lenders have not yet made any adjustments. The implication is that tomorrow morning's rates would be higher than they are today assuming bonds don't change between now and then. An additional layer of complication is that we'll receive the September jobs report at 8:30am ET tomorrow. Because most mortgage lenders publish their rates between 9:30and 10:30am ET, this means there will be another source of probably volatility to digest before rates come out. Bottom line: if tomorrow morning's jobs data is much stronger than expected, rates would be quite a bit higher. But if the jobs report is weaker, it could offset the bond market losses seen this afternoon, thus keeping rates relatively unchanged.
With economic data being the most consistent source of motivation for rates, the market has been eager for it to return with the reopening of the government. While some higher profile reports have been rescheduled for the coming days (i.e. on Thursday, we'll get the jobs report that we were supposed to get in early October), most updated release dates remain TBD. Then there are the "surprise" releases--reports that completely skipped the step of being officially rescheduled and were simply released at a random moment with no warning. Such was the case with Jobless Claims data this morning. Not to be confused with "the jobs report," weekly jobless claims numbers are inferior in terms of their ability to set the tone for interest rates. To be fair, they CAN have a moderate impact at times, but their ability to do so is nowhere close to that of the monthly jobs report. Case in point, today's belated jobless claims data had no impact. Nonetheless, the reemergence of government econ data is an important proof of concept when it comes to getting an accurate sense of where rates should be heading. While not technically econ data and not affected by the shutdown, Wednesday brings a scheduled event that can be just as relevant as many government reports. At 2pm ET, the Fed will release the minutes of its meeting from late October. This isn't a rate cut opportunity, but it could shed additional light on the odds of a cut at the mid-December meeting.
The bond market (which dictates rates) was roughly unchanged over the weekend. As such, it's no surprise to see mortgage rates right in line with Friday's latest levels. For the average lender, this means conventional 30yr fixed rates are at the upper boundary of a narrow range stretch back to September 4th. It was the September 5th jobs report that sparked a rate rally that resulted in the lowest levels in over a year. Due to the government shutdown, that was the last time a jobs report was released. No that the government is reopen, the jobs report that normally would have come out at the beginning of October will be released this Thursday. While it likely won't be as potent as a regularly-scheduled release in terms of its impact on rates, it can nonetheless result in some volatility. Before that, we'll get the latest Fed meeting minutes on Wednesday (a more detailed account of the Fed's discussion that took place 3 weeks ago). With numerous recent Fed speakers calling a December rate cut into question, this particular installment of Fed Minutes could have a bigger impact than normal.
Mortgage rates were only modestly higher on Friday, but because of the narrow prevailing range and previous increases this week, that brings us right in line with 2-month highs. Bonds (which dictate rates) began the day with promise. There was heavy buying (good for rates) in the 7am hour. This coincided with stocks challenging their lowest levels in weeks. But both stocks and bonds bounced back in the 9am hour. Bonds ultimately erased all of the morning's gains and, thus, the hope for today's mortgage rates to be lower than yesterday's.
