Perfectly Logical Reaction to On-Target Data
It's not necessarily a fun fact to face, but today's bond market sell-off was a perfectly logical reaction to the modest beat in NFP. But wait, what about the negative revisions?! Yes, it's still a logical reaction. Reasons for this are exhaustively discussed in today's video, but the short version is as follows. Wednesday's rally was largely about Wednesday's data carrying anecdotal implications for Friday's jobs report. When Friday's jobs report didn't deliver the goods, the rally was erased. Revisions didn't matter because last month's NFP was a big beat in and of itself and only revised to levels that were still higher than today's headline. Bottom line: NFP looks sideways at decent levels--not at all worthy of the concern suggested by Wednesday's reports and other generally weaker data over the past week.
Econ Data / Events
Nonfarm Payrolls
139k vs 130k f'cast, 147k prev
Unemployment Rate
4.2 vs 4.2 f'cast/prev
Market Movement Recap
08:44 AM Weaker after NFP. MBS down 6 ticks (.19) and 10yr up 5.7bps at 4.453
12:14 PM weakest levels of the day with MBS down a total of 11 ticks (.34) and 10yr yields up 9.1bps at 4.486.
03:55 PM Slow, steady selling trend continues (maybe leveling off now) with MBS down 13 ticks (.41) and 10yr up 11.1bps at 4.505
Mortgage rates have enjoyed a nice run since May 21st, with the MND Index (average top tier 30yr fixed scenarios) falling from a recent peak of 7.08% to this week's low of 6.87%. As recently as yesterday afternoon, rates were still much closer to those lows at 6.89%. One day can make a big difference and today turned out to be that day. We knew there was a risk of volatility due to the release of the big jobs report this morning. Unfortunately for rates, the news was less dire than markets were prepared for. Specifically, traders of the bonds that influence interest rates were moving into a defensive position after this week's previous economic reports foreshadowed some extra weakness in today's jobs report. In this case, the defensive position would equate to "buying more bonds" which, in turn, pushes rates lower. In other words, they'd taken a lead-off toward lower rates based on the suspicion that the data might come out a bit worse than forecast. As it happened, however, the data was right in line with forecasts. With that, the proverbial runner was quick to return to base with the rate index heading back up to 6.97%. This is a fairly middle-of-the-road rate over the past month and a half. The implication is that we're right back in the same holding pattern observed over the past few weeks as we wait for a more compelling shift in the economic data or other key events.
The Mortgage Bankers Association’s (MBA) latest survey showed a pullback in mortgage applications, with rates dipping slightly after a three-week climb. The week’s numbers were also affected by the Memorial Day holiday, contributing to larger unadjusted declines. Still, the broader trend remains intact, with purchase demand continuing to outperform last year despite short-term rate volatility. “Most mortgage rates moved lower last week, with the 30-year fixed rate declining to 6.92 percent and staying in the 6.8 to 7 percent range since April,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. He noted that purchase applications remain 18 percent higher than the same week last year, driven in part by a modest rise in FHA activity. Meanwhile, refinance activity fell again, and the average refi loan size dropped to the lowest level since July 2024, suggesting borrowers are still holding out for better rates. Seasonally adjusted refinance applications fell 4 percent from the previous week, while purchase apps also declined 4 percent. On an unadjusted basis, both categories dropped by 15 percent, though the year-over-year numbers remain solid: purchases are up 18 percent and refis are up 42 percent versus this time in 2024. Mortgage Rate Summary:
Today is the 81st anniversary of D-Day. “My granddad was responsible for 25 downed German planes in WW II. To this day, he is still known as the worst mechanic the Luftwaffe ever had.” On the anniversary of D-Day, let’s hope the entire world is not involved in a war again, although humans have had a recurring theme of conflict. Scaling things down significantly but keeping with the “recurring” theme… Lenders hope that applications and locks are recurring, but it is continuing to be sketchy. According to Curinos’ new proprietary application index, refinances decreased 12% week over week and decreased 28% in May; the purchase index decreased 16% week over week and increased 6% for May as a whole. But in May 2025 funded mortgage volume increased 12% YoY and increased 6% MoM. Curinos sources a statistically significant data set directly from lenders to produce these benchmark figures, and drills into this data further here. (Today’s podcast can be found here and this week’s is sponsored by CreditXpert, the credit optimization platform that helps today’s top mortgage originators and more than 60,000 mortgage professionals qualify more applicants, make more competitive offers, reduce LLPA premiums, and close more loans. Today’s has an interview with Jake Perkins on the new Chrisman Marketplace and how it is adding value to the industry.) Products, Software, and Services for Lenders Following a highly successful launch, Origination Boost, spearheaded by Mandi Feely-Swain, EVP of Premier Mortgage Resources and Idaho’s #1 Loan Originator, is proving to be a game-changer for loan officers. Now in its second year, Origination Boost is not just maintaining momentum; it’s raising the bar and helping loan officers move closer to their goals. The program’s twice-monthly coaching calls continue to offer tactical strategies and high-level mindset coaching, keeping participants laser-focused on results. The exclusive Origination Boost app adds even more value, offering on-the-go accountability tools and tracking systems that drive measurable production increases. Feely-Swain recently announced new incentives for those participating in Origination Boost, including free marketing services when goals are met. Learn more: info@pmrloans.com.
The bond market was likely taking a bit of a lead-off ahead of today's jobs report, inspired by a string of weaker economic data over the past week. Wednesday's ADP and ISM data had an especially notable impact, prompting us to note the asymmetric risk associated with NFP at the time. In other words, traders were gearing up for a number that was even lower than the 130k consensus. When the actual number came out at 139k, there was a rush to get back into a more neutral position. While it's true that last month's NFP was revised to 147k from 177k, this is not significant evidence of weakness in the bigger picture. 177k was a big beat at the time and 147k is still quite healthy given current immigration dynamics. Top it all off with a relatively steady 4.2% unemployment rate and this report simply wasn't bad enough to justify the lead-off.
Watching Rates
Check our some recent articles and posts about current rates.
Mortgage rates have enjoyed a nice run since May 21st, with the MND Index (average top tier 30yr fixed scenarios) falling from a recent peak of 7.08% to this week's low of 6.87%. As recently as yesterday afternoon, rates were still much closer to those lows at 6.89%. One day can make a big difference and today turned out to be that day. We knew there was a risk of volatility due to the release of the big jobs report this morning. Unfortunately for rates, the news was less dire than markets were prepared for. Specifically, traders of the bonds that influence interest rates were moving into a defensive position after this week's previous economic reports foreshadowed some extra weakness in today's jobs report. In this case, the defensive position would equate to "buying more bonds" which, in turn, pushes rates lower. In other words, they'd taken a lead-off toward lower rates based on the suspicion that the data might come out a bit worse than forecast. As it happened, however, the data was right in line with forecasts. With that, the proverbial runner was quick to return to base with the rate index heading back up to 6.97%. This is a fairly middle-of-the-road rate over the past month and a half. The implication is that we're right back in the same holding pattern observed over the past few weeks as we wait for a more compelling shift in the economic data or other key events.
Mortgage rates began the day perfectly in line with yesterday's latest levels for the average lender. By the afternoon, the underlying bond market had lost enough ground that a handful of lenders were forced to issue mid-day reprices thus taking the average just a bit higher. Unlike the past few days, there wasn't a highly important economic report to cause volatility this morning. The underlying bond market drifted into progressively weaker territory on a combination of factors. These included the market's reaction to the European Central Bank's policy announcement as well as headlines regarding a phone call between Trump and Xi that may lead to improved trade relations. In general, lower tariffs and freer-flowing trade have resulted in stocks and rates moving higher together--what the market sometimes refers to as a "risk-on" move. Stocks notably ended up moving lower by the afternoon even as bond yields remained higher. We can reconcile this in several ways, but none of them are too important. What's important is that tomorrow morning brings the big jobs report--the data that has the greatest potential to cause volatility for rates of any of this week's offerings. Potential isn't always realized. The farther the number falls from forecasts, the greater the potential impact, for better or worse.
Whether or not today's drop in rates is meaningful depends on one's perspective, but in the context of recent rate movement, it's definitely noticeable. The simplest way to think about the improvement is as follows: the average lender is now about an eighth of a percent lower in just over a week. If we want to be more specific, today's average top tier 30yr fixed rate is down to 6.87% from 6.96% yesterday, making it the best single day drop since mid April. The same rate was 7.08% exactly 2 weeks ago. Mortgage lenders tend to offer rates in eighth point increments. When the average was at 7.08%, the prevailing rate quote would have been 7.125%. Today it would 6.875%, or a 0.25% improvement. This would drop the payment on a $400k mortgage by roughly $67/mo. As far as motivations for today's larger gains, it all comes down to economic data (which is really the only game in town if we hope to see further improvement). The eternal trade off of the relationship between data and rates is that the economy must weaken in order for rates to drop. Today's data featured a sharply weaker reading in the labor market from ADP as well as a the lowest reading in nearly a year on a key service sector gauge. Tomorrow is the least consequential day of the week in terms of economic data, but Friday brings the most significant data of the week in the form of the big jobs report. If it corroborates the message of today's data, rates could continue lower, but it's important to note that there are many past examples of the jobs report being wildly different from the data that comes out earlier the same week.
Sometimes a Tuesday is just a Tuesday for mortgage rates. In the present week, any day is capable of generating some volatility due to one of several economic reports on the calendar. This isn't always the case, but the first week of any given month is action-packed when it comes to data. Econ data is one of the top reasons that interest rates might move higher or lower on any given day. Today's most relevant report was the Job Openings and Labor Turnover Survey (JOLTS). While this is fair stale as far as labor market data goes, it has nonetheless proven to be a capable market mover. JOLTS may have been worth some more volatility today, but it carried a mixed message. On one hand, job openings moved higher (bad for rates). On the other hand, a separate part of the report showed fewer people giving up their employment (good for rates). The offsetting penalties limited the overall reaction, but it was nonetheless "bad for rates." That said, the average lender is still right in line with yesterday's latest levels because the bond market had improved overnight. In other words, JOLTS data simply took bonds/rates back to where they were yesterday afternoon.
