Posted To: MBS Commentary

This morning's ECB announcement proved to be moderately bond-friendly. Combined with weaker Jobless Claims data, it's been enough to keep bonds inside this week's new, lower yield range marked by a ceiling of roughly 1.30% (we have it marked at 1.295, or 1.29+ for short). We're close enough that it wouldn't take much of a negative impulse for that ceiling to be challenged, but more dramatic movement may be reserved for the next two weeks which will bring a Fed announcement and the hefty data cycle culminating in NFP Friday on August 6th. Perhaps the bigger question is whether or not yields just experienced a big-picture bounce by filling February's opening gap (a rare technical phenomenon where bonds start a new trading day noticeably farther away from the end of the...(read more)

7/22/2021 9:20:17 AM

Posted To: MBS Commentary

Defensive Shift Ahead of ECB Announcement Coming into the week, there was some speculation that Monday's bond rally was based on expectations for a friendly announcement from the European Central Bank (ECB) on Thursday morning, but it probably makes more sense to ascribe the move to other variables (new covid concerns, trading positions, momentum/technicals). That also makes it possible to view today's weakness as some sort of "pre-ECB positioning," but that's also probably not ideal. In other words, we have a defensive shift ahead of the ECB announcement, but not necessarily because of it. Econ Data / Events Fed MBS Buying 10am, 1130am, 1pm Market Movement Recap 09:34 AM Slightly weaker overnight with some push back between 5am and 9am. Sellers seized those higher prices...(read more)

7/21/2021 4:01:06 PM

Posted To: Pipeline Press

Experienced mortgage loan originators (MLOs) know that a rate lock is a rate lock. The removal of the adverse market fee of .5 for conventional conforming refis above $125,000 has caused conversations about pricing, borrower, and profit strategy. One veteran MLO wrote to me and stated, “If the price had worsened, we wouldn’t be going back to borrowers for that difference. It’s not a one-way street. My borrowers don’t know what the FHFA is, but know their locked rate. My company is not repricing its entire locked refinance pipeline. If asked, and I doubt if I will be, I will explain to my borrowers that a lock is a lock. And none of them want to start the process over again with a new lender for .125 in rate when rates are already great on a refi.” A veteran capital...(read more)

7/21/2021 10:42:57 AM

Posted To: MND NewsWire

After a strong showing during the week ended July 9, mortgage application volume pulled back. The Mortgage Bankers Association's (MBA) Market Composite Index, a measure of that volume, decreased 4.0 percent on a seasonally adjusted basis during the week ended July 16 although it was 20 percent higher than the prior week before adjustment. The Refinance Index decreased 3 percent from the previous week and was 18 percent lower than the same week one year ago, but the refinancing share of total applications grew to 64.9 percent of total applications from 64.1 percent the previous week. The seasonally adjusted Purchase Index decreased 6 percent but was 17 percent higher on an unadjusted basis from the previous week and 18 percent lower than the same week in 2020. Refi Index vs 30yr Fixed Purchase...(read more)

7/21/2021 9:02:32 AM

Posted To: MBS Commentary

With a moderate dose of weakness in the overnight session, 10yr yields have quickly found themselves on the doorstep of 1.25%--a level that marked the threshold of a fun little party over the past 2 days as yields moved as low as 1.128%. The prevailing belief is that rates are entering another period of consolidation before making their next big move this Fall/Winter, but we're still not sure where the boundaries of that range will be. A ceiling of 1.25% would be among the most bullish scenarios. This looks like too much to ask for at the moment, but there is a small amount of weakness that could be tolerated without affecting the potential consolidation pattern seen in the following chart. In the rather likely event that weakness continues and/or that volatility proves to be higher in...(read more)

7/21/2021 8:23:38 AM

Posted To: Mortgage Rate Watch

There are two pieces of big news for mortgage rates over the past few business days. The first arrived last week in the form of the removal of the adverse market fee that artificially increased rates for refinance transactions starting late last summer. The second arrived yesterday in the form of an impressive improvement in the bond market (bonds are the primary source of motivation for mortgage rates). This friendly double whammy pushed the average lender easily into the lowest rate range since early February with conventional refinance quotes once again coming in under 3.0% in best-case scenarios. It remains to be seen how long we'll be able to enjoy these rates. Today's bond market volatility offered a warning . The first few hours of trading were actually stellar, with bonds improving...(read more)

7/20/2021 2:30:00 PM

Posted To: MND NewsWire

The Mortgage Bankers Association is projecting a sizeable decline in new home sales occurred last month as applications for their purchase declined 3 percent month-over-month and were 23.8 percent lower than in June 2020. The change does not include any seasonal adjustment. Based on the application data, gathered from its Builder Application Survey (BAS) and other data including an estimate of market coverage, MBA estimates that single-family home sales were running at a seasonally adjusted annual rate of 704,000 units in June 2021. This is a decrease of 5 percent from the May pace of 741,000 units. On an unadjusted basis, MBA estimates that there were 66,000 new home sales in June 2021, a decrease of 2.9 percent from 68,000 sales in May. "Homebuilders are encountering stronger headwinds of...(read more)

7/20/2021 2:29:16 PM

Posted To: MND NewsWire

Housing starts posted a second straight increase in June while permits continued what has become a long, slow, slide. The U.S. Census Bureau and the Department of Housing and Urban Development said builders began construction on new homes at a seasonally adjusted annual rate of 1.643 million during the month, a 6.3 percent increase over the 1.546 million rate of starts in May. Those were originally reported slightly higher, a 1.572 million rate. Starts are now 29.1 percent higher than in June 2020. The June number was higher than expected by analysts. Those polled by Econoday had a consensus of 1.590 million units. Their forecasts were wide ranging, running from 1.520 to 1.693 million units. Single family starts were at a seasonally adjusted annual rate of 1.160 million units, also a 6.3 percent...(read more)

7/20/2021 2:28:17 PM

Posted To: MBS Commentary

Intraday Weakness vs Bigger Picture Strength There comes a time in the midst of an aggressive snowball rally (or sell-off) in the bond market where we're forced to consider the mortality of the short term trend. As 10yr yields jumped up almost 10bps in a few short hours, today was that day for the current move. Context is important though, and the weakness left Treasuries only slightly worse off than yesterday's close (MBS are still slightly stronger with a few hours to go). Considering yesterday's closing levels represented an immense rally from the previous week, it's hard to say which side is making the more compelling point. Bottom line, there's certainly reason for caution, but not necessarily strict orders to abandon hope. Econ Data / Events Fed MBS Buying 10am, 1130am...(read more)

7/20/2021 2:24:04 PM

Posted To: Pipeline Press

t was bound to happen: My cat Myrtle and I came to blows. She wanted to spend her trust fund money, earned on the catwalk in her prime, to pay various periodicals and ranking services around the nation to say that she won the “2020 Cat of the Year Mentioned in a Daily Commentary.” Apparently, she had seen the various rankings that companies and MLOs pay for to promote themselves, and also how much it takes to buy some of them. Some rankings, of course, are the result of actual votes with no outgo from the marketing budget. I’m so old, I remember when “fame” and success was a by-product of talent. And yes, lenders and their MLOs tend to be very competitive, whether it is product, price, or service. Mr./Ms. Mortgage loan officer, how much does your company pay this...(read more)

7/20/2021 10:52:10 AM