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It depends quite a bit on the lender in question, but at some point between yesterday morning and this morning, the average lender dropped rates at the fastest single-day pace in months. Before you get excited, there's a catch--two or three of them actually. The first catch is that some lenders split that improvement between yesterday afternoon and this morning.  The more general catch is that these sorts of "biggest drop in a long time" observations are almost always seen after rates have just surged to "the highest levels in a long time."  That's absolutely the case this time around. The third catch isn't too important. It involves a bit of deterioration in the bond market resulting in some lenders bumping rates slightly higher this afternoon.  The average lender is still in much better shape than yesterday morning (and much worse shape than most any other morning going back to June 2001).  Moving on from "catches" to plain old frustrating uncertainty, mortgage rates need new economic data in order to improve.  Specifically, rates would need to see less resilience and growth in the economy.  Frustratingly, the government shutdown (which looks likely if not certain as of this writing) would prevent several of the most important reports from coming out next week. Granted, if those reports had come out strong, they would push rates higher, but as it stands, we don't even have an opportunity for meaningful improvement.

Bonds Almost Hold Onto Gains Ahead of Shutdown Uncertainty Bonds improved moderately overnight, adding onto what was already a fairly substantial recovery yesterday.  The morning's PCE data was slightly lower than expected, but bonds didn't seem unequivocally happy about that.  There was a modest extension of the rally and then a slow give-back into the PM hours.  Trading was very flat near unchanged levels after noon ET.  Month/Quarter-end tradeflows are assumed to be underpinning some of the volatility of the past 3 days, as is the uncertainty surrounding the government shutdown.  The most direct implication for bonds is that  they must navigate the most important data week of the month without the most important data (no jobs report or JOLTS next week due to the shutdown). Econ Data / Events Core PCE m/m 0.1 vs 0.2 f'cast, 0.2 prev Core PCE y/y 3.9 vs 3.9 f'cast, 4.3 prev Market Movement Recap 08:46 AM Moderately stronger overnight with some additional improvement after data.  10yr down 5+bps at 4.524.  MBS up just over a quarter point.  11:11 AM Giving up some gains.  MBS off a quarter point from highs, but still up nearly an eighth on the day.  10yr still down 4bps on the day but up 3bps from lows.  03:13 PM Weakest levels of the day for 10s, up 1bp at 4.588.  Weakest liquid levels for MBS, down an eighth of a point in 6.0 coupons. 

The trading day began on a fairly positive note with a strong hand-off from Europe and reasonably friendly inflation data at 8:30am.  After a few moments of indecision, bonds rallied modestly on the data, but have been giving back the gains as we head into the PM hours.  The rest of the day may be dictated by month/quarter-end tradeflows and government shutdown headlines.   Notably, there is a clear Fed trade pattern in stocks and bonds, suggesting markets are actively adjusting Fed policy expectations based on data and events.

Shutdown or no shutdown, the National Park Service’s Fat Bear Week is approaching, focused on how these behemoths tip the scale. Here’s your tip of the day: Having books in your Zoom background makes you seem more trustworthy. What if one of them is “The Complete Idiot’s Guide to Mortgages”? Maybe put some gold bars on the shelf instead? You can buy them now at Costco. Owning a home is a great way to build wealth, although mortgage rates are at 23-year high and mortgage applications have fallen 27 percent year-over-year… is your staffing down 27 percent from a year ago? (I know that’s simplistic, but…) At least you’re not Tanner Winterhof whom the Federal Reserve issued an enforcement action on for falsification of bank documents. On the more constructive side of things, originators and others can learn about special-purpose credit programs (set out unique standards and benefits to make loan qualification easier for people who are from underserved populations) in today’s Mortgage Collaborative’s Rundown at 3PM ET. (Today’s podcast can be found here and this week’s is sponsored by Built. Built is powering smarter and faster money movement for the entire construction and real estate ecosystem, all while reducing risk. Hear an interview with LoanSense’s Catalina Kaiyoorawongs on why resuming student loan payments matters to the mortgage industry.) Lender and Broker Software, Programs, and Services In challenging down economic times, Loan Vision is your solution to maximizing profitability and reducing costs in your business. With Loan Vision, companies see improvements of 25 to 35 percent decrease in days to close the books, 20 percent reduction in accounting headcount, complete LOS to G/L automation, and improved reporting and visibility that allow for better business decisions. Don’t accept a competitive disadvantage or get caught flat footed in a recovering market. To improve your cash position, gain a competitive edge, and prepare your business for sustained growth, contact Carl Wooloff to schedule a call today.

Bonds Bounce Despite Stronger Data Bonds lost ground overnight and logically added to the losses after the morning's Jobless Claims data.  Dovish comments from Fed's Goolsbee helped push back in the other direction and month-end tradeflows added to gains in the afternoon.  All told, it was a token correction much like last Friday's, but one that had more of a foundation in a relevant market movement factor (i.e. new ideas from Goolsbee on the Fed possibly being able to claim some victories on inflation without the need to visibly damage the labor market as evidence of success).  Econ Data / Events Jobless Claims 204k vs 215k f'cast, 202k prev GDP (Q4 final) 2.1 vs 2.1 f'cast, 2.0 prev GDP Delator 1.7 vs 2.0 f'cast, 4.1 prev Market Movement Recap 08:49 AM Weaker overnight and additional selling after data (despite an initial, paradoxical mini rally). 10s up 6bps at 4.667.  MBS down 3/8ths after factoring out some illiquidity 12:24 PM Back into positive territory on gradual gains kicked off by Goolsbee comments. MBS up 3 ticks (.19).  10yr still up 1.1bps at 4.618, but down from highs of 4.688. 02:58 PM Best levels of the day with MBS up 6 ticks (.19) and 10s down about half a bp at 4.601