Eerily Calm and Strong For 2nd Straight Day
After being heavily conditioned to expect elevated volatility with unpredictable timing, the past two trading sessions have been tremendous departures from the norm. Both days featured linear, reasonably big improvements without any singular flashpoints that deserve any more credit than a general sense of cooler heads prevailing on the policy-making front. Indeed, when the week ends with Trump saying "we will be reasonable on tariffs" as opposed to doubling down on triple digit brinksmanship, something has certainly changed and both sides of the market are looking relieved.
Econ Data / Events
Consumer Sentiment (revision/final)
52.2 vs 50.8 f'cast
1yr inflation 6.5 vs 6.7 f'cast
5yr inflation 4.4 vs 4.4 f'cast
Market Movement Recap
09:58 AM Modestly stronger overnight and mostly holding gains so far. MBS up 5 ticks (.16) and 10yr down 3.8bps at 4.284
02:19 PM Additional gains and near best levels. MBS up a quarter point and 10yr down 5.6bps at 4.265
04:51 PM Heading out at best levels, MBS up 3/8ths and 10yr down 7bps at 4.25.
The news on mortgage rates has been frustratingly mixed recently, depending on the source. This is a factor of the various time frames and methodologies employed by different purveyors of rate data. If you're reading this, however, none of that matters because the following is as timely as it gets: the average mortgage lender is now at the lowest level since April 7th. Improvements versus yesterday vary depending on the lender. Some of them made friendly adjustments yesterday afternoon in response to stronger trading in the bond market. Others waited to make those adjustments until this morning. In the bigger picture, rates are still slightly elevated compared to their recent stint calmly holding the lowest levels since December. But they're not looking nearly as panicked as they did in the week following the big tariff announcements earlier this month. The coming week brings an active slate of economic data and events with the power to whip up some additional volatility. As always, we can only know about the potential for volatility. The actual direction and magnitude of rate movement will depend on the outcome of the economic reports as well as any other relevant headlines that emerge throughout the week.
As is the case for the monthly data on New Home Sales from the Census Bureau, the National Association of Realtors (NAR) Existing Home Sales report does not make for exciting news these days. It's not that the news is tragic or alarming either. It just sort of... is. Whereas New Home Sales have been able to hold sideways near their pre-covid highs, Existing Sales continue to languish near the lowest levels in decades. Apart from the great financial crisis in 2008-2010, you'd have to go back to 1995 to see lower levels. "Home buying and selling remained sluggish in March due to the affordability challenges associated with high mortgage rates," said NAR Chief Economist Lawrence Yun. "Residential housing mobility, currently at historical lows, signals the troublesome possibility of less economic mobility for society."
The Census Bureau released March New Home Sales data this week, and it was near the best levels seen since early 2022. Before you get too excited about that, a caveat is in order. Simply put, when it comes to housing market data, nothing has been more uneventful than new home sales over the past few years. The chart tells the story. It's tough to make an entire news article interesting when it comes to this data, so we won't waste your time. Instead, here are some bullet-pointed highlights that showcase some of the departures from the status quo (these are common, and they tend to come out in the wash in the longer term):
Sales fell 22.2% in the Northeast region, but had risen just as sharply in the previous month.
Sales jumped nicely in the South for the 2nd straight month (13.6% this time) and are now at their highest levels since April 2021.
The South accounts for 483k of the 724k national total.
The news on mortgage rates has been frustratingly mixed recently, depending on the source. This is a factor of the various time frames and methodologies employed by different purveyors of rate data. If you're reading this, however, none of that matters because the following is as timely as it gets: the average mortgage lender is now at the lowest level since April 7th. Improvements versus yesterday vary depending on the lender. Some of them made friendly adjustments yesterday afternoon in response to stronger trading in the bond market. Others waited to make those adjustments until this morning. In the bigger picture, rates are still slightly elevated compared to their recent stint calmly holding the lowest levels since December. But they're not looking nearly as panicked as they did in the week following the big tariff announcements earlier this month. The coming week brings an active slate of economic data and events with the power to whip up some additional volatility. As always, we can only know about the potential for volatility. The actual direction and magnitude of rate movement will depend on the outcome of the economic reports as well as any other relevant headlines that emerge throughout the week.
Mortgage rates continue the slow, bumpy process of healing from the rapid rise seen 2 weeks ago. Last week was a solid victory in that sense with rates moving steadily and meaningfully lower without any major rebounds. The present week started out on shakier footing as rates lurched higher on Monday. Fortunately, the sailing has been smoother since then. Today was actually the best day of the week so far for the underlying bond market. Most of the improvement happened in overseas trading overnight, but gains continued in the U.S. The average top tier 30yr fixed rate fell 0.04% from yesterday. Based on the timing of the bond market gains, if nothing were to change overnight, the average lender would be able to move slightly lower again tomorrow. NOTE: the preceding is not a prediction. It's merely a comment on the fact that the bond market improved a bit more than the average mortgage rate would suggest. There's never a guarantee that bonds will do any particular thing between now and the next time mortgage lenders are setting rates for the day.
Mortgage rates are an extension of the financial market, so it's no surprise that they've been more volatile than normal over the past few weeks as markets react to fiscal headlines. The latest dust-up involved Trump's criticism of Fed Chair Powell which resulted in higher rates over the weekend. Now today we've had several comments from Trump (starting yesterday evening) saying that he was never planning to fire Powell and just generally conveying a more measured tone. Financial markets responded favorably. Had this been the only news of the day, rates would have dropped almost an eighth of a point. We can arrive at this conclusion due to trading levels in the bond market at the time. But other news pushed back in the other direction. Specifically, a closely watched gauge of business activity showed the sharpest spike in prices in 13 months in the services sector and 29 months for the manufacturing sector. Higher inflation begets higher rates, all other things being equal. Many mortgage lenders were forced to raise rates during the day, ultimately resulting in today's average being only modestly lower than yesterday's.
In not so many words, last week's thesis was that "no news was good news" for mortgage rates. Specifically, an absence of major, unexpected developments on the topic of tariffs and trade helped the underlying bond market retrace some of the recent steps. Those steps resulted in the highest rates in several months and one of the biggest weekly rate spikes in years. The present week began with echoes of that unpleasantness. Headlines regarding Trump's comments about Fed Chair Powell rattled the market and sent rates lurching higher. Now, 24 hours later, an absence of any additional escalation has given way to calmer market movement and generally flat interest rates. In fact, it has been one of the very calmest days in recent memory for mortgage rates. Not only is today's average effectively right in line with yesterday's latest levels. There hasn't even been any intraday changes among mortgage lenders. Specifically, mortgage lenders prefer to set rates once per day and only make adjustments if the bond market experiences sufficient volatility. Lately, that's been a rule rather than an exception. Today, however, we haven't seen enough bond market movement to prompt any intraday changes, thus leaving the top tier conventional 30yr fixed rate just under 7% for the average lender.
