Blogging With The Krew

Check some recent articles and posts about the industry.

Once More: What's Up With MBS Underperformance?

Once More: What's Up With MBS Underperformance? The notion of MBS underperforming Treasuries is front and center today--not because that underperformance is especially large, but mainly because MBS were often in the red while Treasuries were in the green.  We have nothing new to add to yesterday's similar discussion of MBS underperformance but have nonetheless attempted to add a few thoughts in today's video. As for nuts and bolts, it was a boring day for bonds with modest gains for the long end of the yield curve (one major reason for MBS underperformance) and an uneventful, sideways grind in the afternoon.   Econ Data / Events Import Prices -0.6 vs 0.0 f'cast, 0.6 prev Export Prices -0.4 vs 0.1 f'cast, 0.9 prev Consumer Sentiment 65.6  vs 72.0 f'cast 69.1 prev 1yr inflation exp. unchanged  5yr inflation exp. +0.1% Market Movement Recap 08:58 AM stronger overnight, but giving up some gains in the past half hour.  MBS up 1 tick (.03) and 10yr down 2.7bps at 4.218 11:54 AM Choppy trading in a narrow range.  MBS underperforming with 5.5s down 1 tick (.03).  10yr yields are down 3bps at 4.215 03:14 PM Zero change from the last update and very little volatility between now and then.

Mortgage Rates Remain Close to Recent Lows Despite Modest Bump

Today saw the average conventional 30yr fixed rate rise ever so slightly for top tier scenarios.  Most lenders are still quoting those scenarios just under 7%.  Depending on the specific details of any given scenario, rates range from the mid 6's all the way up to the mid 7's.  Unlike each of the past two days, there weren't any major flashpoints for the bonds that underlie mortgage rate movement today.  There were a few economic reports, but neither had a big impact on the market.  All in all: a very calm and boring day--especially compared to almost any other day since last Friday. From here, the market will wait for the next big ticket economic report: Tuesday's Retail Sales.  There are a smattering of other reports next week, punctuated by a holiday closure on Wednesday for Juneteenth. The biggest, most significant movement likely still depends on the economic reports that we just saw and won't see again for nearly a month.  It wouldn't be a surprise to see a more sideways, slightly choppy trend between now and then.

Tired Friday For The Bond Market--Especially MBS

The bond market has a lot on its mind after this past week of economic data and events.  Inflation quickly and increasingly looks like it may (finally) be turning the long-hoped-for corner.  Timely employment metrics raise questions about labor market softening and Fed speakers are so eager to avoid jumping the gun on rate cuts after the Q1 inflation surprise that traders may wonder if they've moved from one side of the center to the other.  Nothing about today will change or inform any of that, it seems.  We might have hoped that Import Prices would add to the disinflationary vibes, but alas, bonds actually lost ground after that (though not necessarily because of it.  After Consumer Sentiment data also failed to inspire, it's clear that bonds are checked out for the week and the trades coming in are occurring for reasons that are unrelated to today's events.

LOS, Processing, Non-QM, IT Tools; Private Equity, Manufactured Homes, and Freddie/Fannie

“In Florida earlier this week we celebrated with a couple of adult beverages: Metamucil and Ensure.” Every state has its quirks, and every state is made fun of by those in other states. Human nature, right? Here in Chicago, the restaurant scene is on fire, but White Sox fans aren’t happy about the team having the worst record in the majors. While the nation’s fastest-growing cities continue to be in Sun Belt states, new population estimates show that some of the top gainers are now on the outskirts of metropolitan areas or in rural areas. For example, to the west of Chicago, Rockford has become one of the top real estate markets in the nation! And with a hot real estate market usually comes increased lending. What originator can’t learn from hearing another top producer, especially when they love what they do? Today The Mortgage Collaborative’s Rundown (noon PT) will feature Austin Lampson who was just highlighted as one of the top 5 female loan originators in the country in 2023 and have been in the top 1 percent of loan originators since 2014! (Today’s podcast is found here, and this week’s are sponsored by Richey May, a recognized leader in providing specialized advisory, audit, tax, cybersecurity, technology, and other services to the mortgage industry. Hear an interview with Loan Atlas’ Craig Strent on building your origination business based on non-Realtor referral sources.) Software, Products, and Services for Lenders and Brokers Transform your mortgage operations with Dragon9 Partners, a leading IT solutions firm with years of hands-on experience in mortgage origination, sales, and servicing. Whether you are a small, medium, or large Lender/Broker, our expert team understands the intricacies of the mortgage industry and is dedicated to delivering innovative technology solutions tailored to your needs. Whether you are looking to streamline your origination process, boost sales efficiency, or enhance servicing operations, we offer comprehensive IT consulting services to drive your success. Partner with us to leverage cutting-edge technology, improve customer satisfaction, and achieve operational excellence. Let Dragon9 be your trusted technology partner in navigating the complexities of the mortgage landscape. Contact us today to learn how we can help you achieve your goals. The first 3 responses will receive a free cybersecurity readiness assessment.

Helpful Data, MBS Underperformance, Is This Time Different?

Helpful Data, MBS Underperformance, Is This Time Different? The bond market reacted favorably to this morning's economic data which consisted of sharply lower producer prices at the core level and sharply higher jobless claims.  But based on the next few hours, traders might say the initial move was an overreaction.  It wasn't until the 30yr bond auction that Treasury yields were able to break to new lows for the day.  MBS, however, never made that quantum leap for reasons we ponder in today's recap video.  One of the reasons has to do with the chance that "things are changing" in terms of broad rate momentum, but we can't really know if this time is different until several months of data confirm the story that's currently only 2 days old.  Econ Data / Events Month over month core PPI 0.0 vs 0.3 f'cast, 0.5 prev Year over year core PPI 2.3 vs 2.4 f'cast, 2.4 prev Jobless Claims 242k vs 225k f'cast, 229k prev Market Movement Recap 09:18 AM modestly stronger overnight with additional gains after data.  MBS up 7 ticks (.22) and 10yr down 4.2bps at 4.276 10:59 AM Slowly losing ground after initial data-driven rally.  MBS still up 5 ticks (.16) and 10yr still down 4.1bps at 4.278. 11:46 AM Bouncing back a bit now.  10yr down 6.4bps at 4.256.  MBS up nearly a quarter point. 01:05 PM Best levels of the day after 30yr bond auction.  10yr down 9.5bps at 4.224.  MBS up 10 ticks (.31). 03:11 PM Sideways in the PM for MBS, still up 10 ticks in 5.5 coupons.  10yr broadly sideways, currently down 8bps at 4.239

Watching Rates

Check our some recent articles and posts about current rates.

Mortgage Rates Remain Close to Recent Lows Despite Modest Bump

Today saw the average conventional 30yr fixed rate rise ever so slightly for top tier scenarios.  Most lenders are still quoting those scenarios just under 7%.  Depending on the specific details of any given scenario, rates range from the mid 6's all the way up to the mid 7's.  Unlike each of the past two days, there weren't any major flashpoints for the bonds that underlie mortgage rate movement today.  There were a few economic reports, but neither had a big impact on the market.  All in all: a very calm and boring day--especially compared to almost any other day since last Friday. From here, the market will wait for the next big ticket economic report: Tuesday's Retail Sales.  There are a smattering of other reports next week, punctuated by a holiday closure on Wednesday for Juneteenth. The biggest, most significant movement likely still depends on the economic reports that we just saw and won't see again for nearly a month.  It wouldn't be a surprise to see a more sideways, slightly choppy trend between now and then.

Mortgage Rates Little Changed at Lowest Levels Since March

You'd have to go back to March 28th to see the average mortgage lender offering a lower rate on a top tier, conventional 30yr fixed scenario than they're offering today.  The same was technically true yesterday and today's rates were just a hair lower. That said, some lenders have done things differently over the past 24 hours due to yesterday afternoon's market volatility.  Bonds lost enough ground after the Fed announcement for some lenders to reissue rates at slightly higher levels.  Those lenders were noticeably improved this morning, but not much better than yesterday morning's levels. Today's helpful data included another friendly reading on inflation--this time at the wholesale level as opposed to yesterday's consumer-level report.  In addition, Jobless Claims rose to the highest levels since last summer.  Weak economic data is generally good for rates, but the claims data raised questions about seasonal distortions.  This is the same timing as last year's uptick in claims, which suggests the seasonal adjustment factors might not be perfectly dialed in for an evolving labor market. For this and several other reason, the bond market will be reluctant to push rates lower at a fast pace until traders can be sure the data is confirming a bona fide economic shift in addition to a high likelihood of a return to 2% annual inflation at the core level.

Mortgage Rates Drop Sharply After Inflation Data (But Bounce a Bit After The Fed Announcement)

It was an incredibly high consequence day for the bond market and, thus, mortgage rates due to the confluence of two extremely important events. The first event was the monthly release of the Consumer Price Index (CPI), which is one of the two economic reports with the far more power to influence interest rates than any other.  The other report is the big jobs report that came out last Friday.  As much as the jobs data hurt, today's CPI helped.  It brought the average top tier 30yr fixed scenario down under 7.0% by a hair--one of the biggest single day drops in months. The good times lasted, but they got less good after the afternoon's Fed announcement.  To be precise, it wasn't the announcement itself, but rather the Fed's updated rate projections that did most of the damage.  After the last round of projections (in March) showed 3 rate cuts in 2024, today's only showed 1.  This wasn't too terribly different from what the market expected, but it was slightly more conservative than hoped.   At the very least, traders didn't find anything in the projections nor in Fed Chair Powell's press conference to suggest that the good times should keep on rolling after already having been so good in the morning hours.  Bonds ultimately retraced about half of their gains and several mortgage lenders had announced late-day rate increases by 4pm Eastern Time.   Lenders who didn't bump rates a bit higher this afternoon would need to account for the bond market movement in tomorrow's rate offerings, assuming the bond market doesn't move too much overnight or early tomorrow morning.

Mortgage Rates Barely Budge For 3rd Straight Day, But That Should Change Tomorrow

Today's mortgage rates were fairly close to yesterday's at the average lender for the 3rd business day in a row.  Friday was the last day with any substantial movement when rates spiked following the upbeat jobs report.  Since then, the average lender has only moved by 0.01% on each of the past 2 days. The absence of movement made better sense yesterday.  Rates are based on trading levels in the bond market and bonds ended the day very close to Friday's levels.  It's a bit harder to reconcile today given that bonds did quite well--especially after the auction of 10yr Treasury notes at 1pm Eastern time. Mortgage rates are often discussed against a benchmark of a 10yr Treasury yield.  The two tend to move in the same direction by generally similar amounts.  10yr Treasury yields are 0.07% lower today and the average mortgage rate is only 0.01% lower at the time of this writing.  What's up with that? First off, Treasuries tend to see bigger upsides and downsides when bonds are reacting to a Treasury auction.  Timing is also a factor with the auction happening late in the day.  Several mortgage lenders have already revised their initial rates lower in response, but the improvements won't be captured in our rate index until tomorrow. That brings us to another issue: tomorrow is a potentially crazy day for better or worse.  Well before mortgage lenders publish rates for the day, the Consumer Price Index (CPI) will be released for the month of May.  It has more power than any other economic report to push rates higher or lower, depending on the outcome.  Anticipation of that volatility could also have mortgage lenders feeling less like making any last minute changes.