Wednesday's mortgage rates were the highest in roughly a month and very close to the highest levels in 2 months. This followed stronger economic data on that same morning. Rates moved back down yesterday after separate econ data told a different story. Now on Friday, it's a mixed bag. The underlying bond market was slightly weaker to start the day, and that meant rates started out modestly higher. But the last economic data of the week showed lower-than-expected consumer sentiment. Bonds improved as a result, but not enough for the average lender to go to the trouble of adjusting their mortgage rate offerings. The implication is that Monday's rates would be back in line with yesterday's if the bond market were to hold steady over the weekend. Keep in mind, that's never a guarantee. The point of sharing the info is simply to relay the fact that rates could endure a bit of bond market weakness over the weekend without being any higher than they are today.
How was the Louve in Paris robbed? The password for the cameras was… ready? Louve. (I’m sure that the Smithsonian, MOMA, and Vatican IT staffs are busy changing theirs. (I have my passwords in a notebook… no one can read my scrawl.) Let’s hope that the Federal Aviation Administration has better security, and its website says, “The FAA manages the world’s safest and most complex aviation system. On an average day, we serve more than 45,000 flights and 2.9 million airline passengers across more than 29 million square miles of airspace.” Even with the Trump Administration lopping 10 percent of that off, it’s still a lot of flights… and many haven’t been paid in five weeks? Speaking of travel, the next time you’re waiting to board, watch out for gate lice. Huh? People who crowd around the gate at an airport, sometimes in an attempt to board before their allotted time, are known as “gate lice” by the airlines. (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 Arc Home's Lee Malone on the HELOC market: the need for it, the various products out there, and how it’s being utilized across origination channels.) Services, Products, Software, and Tools for Lenders and Brokers Eris SOFR Swap futures are an ideal solution for hedging the growing market for Adjustable-Rate Mortgage (ARM) loans. As the interest rate curve steepens, lenders and homebuilders are successfully using ARMs to generate originations and homesales by offering borrowers lower near-term payment amounts. Since the initial period of an ARM behaves like a fixed-rate loan, originators can hedge away the interest rate risk using a SOFR swap with the same tenor as the fixed-rate period (e.g., use a 3-year swap to hedge a 3/1 ARM). Eris SOFR Swap futures provide an easily-accessible and cost-efficient hedging tool, even for smaller originators. Hedging with Eris SOFR allows you to grow your volume by pricing more competitively and improving your execution, without fearing interest rate risk. To explore how Eris SOFR Swap futures can optimize your ARM hedging strategy, reach out to John Douglas.
Although bonds began the day in roughly unchanged territory, they began losing ground shortly thereafter. Things changed at the 9:30am NYSE open as stock losses helped arrest the selling pressure. Then at 10am ET, weaker Consumer Sentiment data (with a record low in current conditions) helped completely erase the selling.
Have Bonds Found Their Post-Fed Footing?
Looked at one way, bonds have been in a moderate selling trend since Fed day. Viewed through another lens, Fed day caused an isolated lurch toward higher yields and then we were generally sideways until yesterday's econ data caused another lurch higher. The common thread in each scenario is that bonds had been unable to find a reason to rally in any meaningful way. Amid such scenarios, we wait for such rallies to restore balance to the near-term outlook. Via weak results in private label econ data, a sharp morning selling spree in stocks (and perhaps some technical support seen as early as yesterday when 10yr yields topped out at 4.16), today provided that rally.
Econ Data / Events
ADP Employment
42k vs 25k f'cast, -32k prev
ISM Biz Activity (Oct)
54.3 vs -- f'cast, 49.9 prev
ISM N-Mfg PMI (Oct)
52.4 vs 50.8 f'cast, 50.0 prev
ISM Services Employment (Oct)
48.2 vs 47.6 f'cast, 47.2 prev
ISM Services New Orders (Oct)
56.2 vs 51.0 f'cast, 50.4 prev
ISM Services Prices (Oct)
70.0 vs 68.0 f'cast, 69.4 prev
Market Movement Recap
09:53 AM Fairly sharp rally at 8:20am CME open with more buying as stocks sell off. MBS up 9 ticks (.28) and 10yr down 6.3bps at 4.097
01:56 PM very flat near strongest levels. MBS still up 9 ticks (.28) and 10yr down 7.6bps at 4.084
04:18 PM Still flat into the after hours session. MBS up 9 ticks (.28) and 10yr down 7.3bps at 4.088
As of yesterday afternoon, mortgage rates were right in line with the highest levels in more than a month. The upward momentum was largely a product of 2 specific days: the October 29th Fed announcement and yesterday's duo of economic reports that suggested less cause for concern over the labor market and strength of the services sector. Now today, we have different economic data telling a different story. Were it not for the government shutdown, the market may have never placed nearly as much emphasis on today's data. In fact, today is the first time that many market participants have even heard of one of the reports (a synthetic jobs report by Revelio). Revelio's data suggested a decline in payrolls in October. Combined with separate data that showed a surge in job cuts, there was a clearly negative message for the labor market. Bad economic news helps bonds which, in turn, is good for rates. All told, today's move completely erased yesterday's damage. The average mortgage lender made it almost all the way back down to last Friday's levels. [thirtyyearmortgagerates]
Watching Rates
Check our some recent articles and posts about current rates.
Wednesday's mortgage rates were the highest in roughly a month and very close to the highest levels in 2 months. This followed stronger economic data on that same morning. Rates moved back down yesterday after separate econ data told a different story. Now on Friday, it's a mixed bag. The underlying bond market was slightly weaker to start the day, and that meant rates started out modestly higher. But the last economic data of the week showed lower-than-expected consumer sentiment. Bonds improved as a result, but not enough for the average lender to go to the trouble of adjusting their mortgage rate offerings. The implication is that Monday's rates would be back in line with yesterday's if the bond market were to hold steady over the weekend. Keep in mind, that's never a guarantee. The point of sharing the info is simply to relay the fact that rates could endure a bit of bond market weakness over the weekend without being any higher than they are today.
As of yesterday afternoon, mortgage rates were right in line with the highest levels in more than a month. The upward momentum was largely a product of 2 specific days: the October 29th Fed announcement and yesterday's duo of economic reports that suggested less cause for concern over the labor market and strength of the services sector. Now today, we have different economic data telling a different story. Were it not for the government shutdown, the market may have never placed nearly as much emphasis on today's data. In fact, today is the first time that many market participants have even heard of one of the reports (a synthetic jobs report by Revelio). Revelio's data suggested a decline in payrolls in October. Combined with separate data that showed a surge in job cuts, there was a clearly negative message for the labor market. Bad economic news helps bonds which, in turn, is good for rates. All told, today's move completely erased yesterday's damage. The average mortgage lender made it almost all the way back down to last Friday's levels. [thirtyyearmortgagerates]
A common recent refrain is that the bond market (which dictates interest rates) is having to make do without many of the most important regularly-scheduled economic reports due to the government shutdown. While this means rates must "fly blind" on many of the days that would normally coincide with these government economic reports, there are other days that still play host to top-tier non-government data. Today boasted not one--but two such reports. Unfortunately for rates, both reports were unfriendly. Rates tend to benefit from economic weakness. As such, when reports are stronger than expected, it pushes rates higher, all else equal. Today's reports were both stronger. ADP's monthly employment tally came in at 42k versus a median forecast of 25k. This isn't an especially large margin of victory, but it was enough to cause weakness in bonds earlier this morning. Less than 2 hours later, the most widely-followed report on the health of the services sector also showed stronger-than-expected results. Bonds continued to weaken after that, ultimately forcing lenders to raise rates back to levels just under those seen in late September. If things had been even a little bit worse, we'd be at the highest rates in just over 2 months. As it stands, we're close enough. MND's 30yr fixed index rose to 6.37% today. September 25th's level was 6.39, and that's as high as we've been since September 4th. In the bigger picture, rates are still much closer to 2025's lows as opposed to the highs, but there's been a palpable shift since the Fed meeting at the end of October. [thirtyyearmortgagerates]
The average top tier 30yr fixed mortgage rate was technically 0.01% higher than yesterday, but that's the smallest possible detected move. It's just as fair to say rates held steady today. While it's always nice to avoid a more serious rate spike on any given day, by holding flat, rates are remaining in line with their highest levels in just over 3 weeks. The bonds that underlie mortgage rates improved slightly throughout the day, but not enough for most mortgage lenders to go to the trouble of adjusting their published rates. The implication is that rates have a bit of an advantage heading into tomorrow. Specifically, if bonds were to hold perfectly steady between now and the time that lenders publish their initial rates, the average lender would likely be slightly lower. How likely is it that bonds hold steady? There's never any way to know for sure. What we do know is that an important economic report will be released right around the time that most lenders are setting rates. As such, the outcome of that report stands a good chance of setting the tone. The report in question is the ISM Services index and it will be released at 10am ET.
