Yesterday, we discussed the fact that mortgage rates were heading into Thursday with a disadvantage (for most lenders, anyway). This had to do with the fact that lenders prefer to avoid changing rates in the middle of the day (unless bond market movement is big enough to force their hands) and the fact that bonds had weakened just enough for lenders to begin considering changing rates by the end of the day. In other words, lenders either had to increase rates yesterday afternoon or this morning, all other things being equal. The only thing that would have mitigated that necessity would have been a bond market rally of equal size to yesterday's losses. Fortunately, that's exactly what we saw after this morning's jobs report. The following chart shows movement in the actual bonds that control mortgage rates. Bottom line: today's rates were the same as yesterday's because the red boxes were at similar levels.
“Here we are, a week away from Thanksgiving, and I’m in Kansas City. My family told me to stop telling Thanksgiving jokes, but I said I couldn’t quit cold turkey.” The CFPB isn’t going away “cold turkey” but yesterday’s personnel move was a reminder that there are clever people in Washington DC. It was a follow up to Trump Administration court filings last week that said the CFPB was on track to run out of money to operate at the beginning of next year and argued that it was legally prohibited from seeking an infusion of funding from the Federal Reserve, which is the bureau’s primary source of funding. Yesterday Donald Trump nominated Stuart Levenbach, a name you can forget as he is merely a placeholder, to be the permanent head of the CFPB. He’s a top aide to White House budget director Russ Vought. A CFPB spokesperson said the nomination was a “technical” maneuver intended to extend Vought’s ability to continue serving as the acting director of the agency without needing Senate confirmation, i.e., the move is designed to empower Vought to continue leading the agency as he moves to shut it down in the coming months. (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 Figure’s Michael Tannenbaum on how small-balance first-liens and HELOC-as-refi strategies work, the latest developments after the company’s IPO, and his thoughts on the current lending climate.)
It's shaping up to be a "no whammies" sort of morning for the bond market. There's no denying that the jobs report was a highly tradeable event. The 30 minutes of volume following the release was by far the highest since the October 29th Fed announcement. But that volume has been fairly well balanced between buyers and sellers. Credit the uptick to 4.4% in the unemployment rate for offsetting the job count coming in at 119k vs 50k f'cast. The downward revision to August also isn't hurting (-4k from +22k). Bonds are managing to hold at just slightly stronger levels so far.
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.
Watching Rates
Check our some recent articles and posts about current rates.
Yesterday, we discussed the fact that mortgage rates were heading into Thursday with a disadvantage (for most lenders, anyway). This had to do with the fact that lenders prefer to avoid changing rates in the middle of the day (unless bond market movement is big enough to force their hands) and the fact that bonds had weakened just enough for lenders to begin considering changing rates by the end of the day. In other words, lenders either had to increase rates yesterday afternoon or this morning, all other things being equal. The only thing that would have mitigated that necessity would have been a bond market rally of equal size to yesterday's losses. Fortunately, that's exactly what we saw after this morning's jobs report. The following chart shows movement in the actual bonds that control mortgage rates. Bottom line: today's rates were the same as yesterday's because the red boxes were at similar levels.
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.
