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Bonds Rally on Month-End Trading and Friendly Inflation Data
Bonds Rally on Month-End Trading and Friendly Inflation Data Bonds began the day in unchanged territory and made cautious gains after reasonably friendly inflation data. PCE was a bigger factor than the Consumer Sentiment inflation expectations, but both contributed. Given our position on the calendar, we should also consider the impact of month/quarter-end positioning. It would help account for some of this week's resilience in US bond markets relative to the suggestion of equities markets or EU bonds. Econ Data / Events Core PCE Inflation y/y 4.6 vs 4.7 f'cast, 4.7 prev Chicago PMI 43.8 vs 43.4 f'cast, 43.6 prev Consumer Sentiment 62.0 vs 63.2 f'cast, 63.4 prev 1yr inflation expectations 3.6 vs 3.8 prev 5yr inflation expectations 2.9 vs 2.8 prev Market Movement Recap 09:31 AM Roughly unchanged overnight. Moderately stronger after inflation data. 10yr down 3bps at 3.517. MBS up 2 ticks (.06). 01:10 PM Slow, steady gains all day. Some month-end bond buying is likely contributing. MBS up more than an eighth. 10yr down 4bps at 3.507 03:20 PM Additional gains before and after the 3pm CME close. 10yr down 6bps at 3.486. MBS up a quarter point.Source: Mortgage News Daily | 31 Mar 2023 | 7:34 pm
No Whammies From Inflation Data
Today brings two new updates on inflation. Core PCE inflation came in at 4.6 vs 4.7% forecasts, down from a 4.7% level previously. This isn't nearly as big of a market mover as the CPI data out 2 weeks ago, but a big deviation could nonetheless have an impact. In this case, we have a small deviation and a favorable one. Later in the morning, the inflation expectations components of the consumer sentiment data were also inoffensive to fans of low rates with the 1yr level dropping 0.2 and the 5yr outlook rising 0.1. One common question regarding the PCE inflation data concerns its relative level of impact. The Federal Reserve occasionally mentions that PCE is its preferred gauge of broad inflation, but we rarely see PCE elicit a big response in the bond market. The reason for this is simple: it comes out two weeks after the substantially similar CPI data. While the indices themselves can vary in terms of outright levels, the direction of movement is extremely well aligned. Both show decades-high inflation beginning to recede at a cautious pace.Source: Mortgage News Daily | 31 Mar 2023 | 4:12 pm
Non-QM, Correspondent, Outsourcing, Income Verification Tools; Third Party Updates; $31 million Warehouse Settlement
“My landlord told me that she would like to have a chat with me about the house's sky-high heating bills this winter. I told her, ‘Sure thing, whenever you want. My door is always open.’” A key selling point for originators, in talking to potential clients on the fence about buying a home, is rent. Rents have been increasing, and there’s no sense of permanency, but if you can’t pay your rent, qualifying for a home loan is going to tough. LendingTree found that more than 8 million U.S. adults live in a household not caught up on rent payments. About 3.6 million adults are also living in households that are not being charged rent, primarily in Mississippi, West Virginia, Alaska, Arkansas, and Alabama. There are plenty of rent disputes in the courts, just as there are disputes and cases involving mortgage bankers. I bring this up because convicted former MBA Chairman Ron McCord and his Oklahoma-based company settled CapLoc's allegations that they put fraudulent loans on a funding line settled for $31 million. Brad Finkelstein did a write up. (Today’s podcast can be found here and this week it’s sponsored by MGIC. Since 1957, MGIC has insured more than 13.5 million mortgage loans with innovative products, tools and strategies that help customers solve problems and fuel growth. Explore tools and solutions to boost your business here. Listen to an interview with Tallulah Le Merle, where she flips the script and asks Robbie questions about mortgages.) Lender and Broker Services and SoftwareSource: Mortgage News Daily | 31 Mar 2023 | 1:27 pm
Mortgage Rates Barely Budge Yet Again
This week's theme has undoubtedly been the extreme absence of volatility in the rate market. Whether we're looking at mortgage rates themselves or a broader rate benchmark such as 10yr Treasury yields, both are right in line with Monday afternoon's latest levels. What's up with that? The bond market (which dictates rates) requires a steady stream of motivation if it's going to inspire noticeable changes in rates. Sometimes several sources of motivation cancel each other out. Other times, the stream simply gets a bit dry, as is the case this week. It won't stay dry though. By the end of next week, the market will have had a chance to digest several new, important economic reports. Those reports are always worth some potential market movement. In this case, we're even more likely to see a noticeable reaction simply because the flat conditions make traders that much more eager to identify (and react to) clues about the next move. In nuts and bolts terms, the average lender remains in the mid 6% range for a top tier conventional 30yr fixed mortgage scenario. Be aware that "points" (or "discount points") currently buy a bigger drop in rate than normal. The average lender would earn the same income on a 6.625% rate as they would at 6.125% with one additional point (i.e. 1% of the loan amount paid upfront). That's roughly twice as much bang for the buck as a discount point normally has.Source: Mortgage News Daily | 30 Mar 2023 | 8:09 pm
Uncanny Calm Unlikely to Last
Uncanny Calm Unlikely to Last For the third straight day, the bond market traded in a range that was significantly more narrow than almost any other day in more than a month. By the time we consider the overall range of the past 3 days, there aren't many comparable examples. The closest candidates tend to fall at the end of the month and to be followed by a quick return to prevailing patterns of volume and volatility. Econ Data / Events Jobless Claims 198 vs 196 f'cast, 191 prev Q4 final GDP 2.6 vs 2.7 f'cast, 2.7 prev Market Movement Recap 08:59 AM Flat start despite some back and forth overnight. Slightly weaker after data, but not necessarily because of it. 10y up 2.3bps at 3.589. MBS down an eighth. 01:32 PM Sideways to slightly stronger. 10yr down 1.5bps at 3.551. MBS up 1 tick (0.03). 03:27 PM modest additional gains in Treasuries heading into the afternoon. 10yr down 2bps at 3.547. MBS still flat at same levels as the last update.Source: Mortgage News Daily | 30 Mar 2023 | 7:52 pm
New Normal; Super Sideways, But For How Long?
Volume and volatility have rapidly died down over the past 3 days as the market settles into a waiting game. What are we waiting for? Successive days without bank drama, bigger ticket econ data, and any new evidence that helps confirm a Fed pivot. It's worth noting that these instances of incredibly narrow, sideways trading ranges tend to be fleeting. We don't have any perfectly correlated examples, but if we cherry pick the last 3 best candidates (3 trading days inside a 10bp range), we see each only lasted for a few days before volatility picked up noticeably.Source: Mortgage News Daily | 30 Mar 2023 | 4:00 pm
Broker Products; LOS, Hedging, CRM Tools; STRATMOR and CX; MISMO Update; Chopra on Servicers
It’s important to be stylish; just ask Pope Francis. (Page down once or twice to see the fake image. And we wish the 86-year-old a speedy recovery from a respiratory infection.) Being Pope has its pluses and minuses, from an occupational perspective, but, returning to mortgage banking, the next time you’re rolling your eyes at a difficult loan file, or exasperated with the behavior of a whiny client, remember that there are worse professions. Being a real estate agent is not bad either. (Remember, not all real estate agents are Realtors, with a capital “R,” and there are many fine agents that aren’t.) Per this source there are 1,548,058 Realtors in the United States as of January, 2023. There are only 578,000 active listings nationwide. You can do the math. Do you have the product set to help those buyers? I don’t know how much it costs real estate brokerages to have their name listed in HW (HousingWire)’s “1,061 real estate brokerage firms in the RealTrends Nation’s Best rankings are a compilation of the brokerages who did not rank in the top 500, but are no less impressive.” “No less impressive”… (Today’s podcast can be found here and this week it’s sponsored by MGIC. Since 1957, MGIC has insured more than 13.5 million mortgage loans with innovative products, tools and strategies that help customers solve problems and fuel growth. Explore tools and solutions to boost your business here. Interview with Equifax’s Craig Crabtree on financially inclusive lending and differentiated data sets.)Source: Mortgage News Daily | 30 Mar 2023 | 2:11 pm
Mortgage Rates Sideways to Slightly Higher
For the second day in a row, mortgage rates didn't move nearly as much as they have been moving on any given day during the past 3 weeks. This is a reflection of calmer trading in the underlying bond market which is, in turn, a reflection of a lower volume of surprise developments in the banking sector. As boring as it may be, we're really in a holding pattern until one of three things happens: more banking drama, economic reports that flesh out the inflation picture, evidence that banking drama has actually had a measurable impact on the economy. Only one of those three things occurs on a regular schedule. The other two are not only variable in terms of timing, but they may not even happen in the first place. That makes the near-term outlook open to debate and highly dependent on unpredictable news headlines. Otherwise, we're waiting for the most important economic reports like the jobs report next Friday or the Consumer Price Index a week later.Source: Mortgage News Daily | 29 Mar 2023 | 9:03 pm
Another Boring (But Resilient) Day
Another Boring (But Resilient) Day After the past few weeks, boring trading days aren't necessarily unwelcome. Their only real downside is that there's not much to say about them. Bonds are waiting for three things: more banking drama (or the progressive absence thereof), economic reports that flesh out the inflation picture, evidence that banking drama has actually had a measurable impact on the economy. Only one of those things happens quickly, so it's not too much of a surprise to see boring trading days with generally sideways momentum. Econ Data / Events Pending Home Sales +0.8 vs -2.3 f'cast, +8.1 prev Market Movement Recap 09:51 AM Roughly unchanged overnight. Some early weakness, but mostly bouncing back--especially MBS. 5.0 coupons are actually 3 ticks (.09) higher on the day while 10yr yields are 2bps weaker/higher. 12:10 PM Bonds rallied during SVB testimonies. 10yr down 2bps at 3.553. MBS up an eighth of a point. 01:19 PM modest losses after 7yr Treasury auction. 10s and MBS both unchanged on the day. 03:07 PM MBS back near strongest levels with 5.0s up more than an eighth of a point. 10yr is roughly unchanged at 3.57%Source: Mortgage News Daily | 29 Mar 2023 | 8:44 pm