“Exploring Interest Rate Projections and Market Headwinds: March 31, 2024 Mortgage Update”

Just before the 4pm mark, Mortgage-Backed Securities (MBS) have seen a slight drop of 6 ticks (.19), while 10-year yields have increased marginally by 6 basis points, trading close to 4.16. This implies the resilient state of the bond market, which has managed to retain all the gains from the recent highs until last Tuesday. Barring the moderately weak performance, the bond market’s endurance should be admired, especially taking into account the Core CPI registering at 0.4% for consecutive months. Also noteworthy, the previous CPI report triggered a jump in 10-year yields to over 4.3.

Minor adjustments rounding down the exact figure of 0.358 to 0.4 and a favorable decrease in the troublesome OER from 0.6 to 0.4 has provided an advantageous scenario for bonds. This even led to a breakeven point for bonds early in the day. A certain waning strength could be credited to the imminent 10-year Treasury auction.

Economic Data / Events showed Core Consumer Price Index (CPI) month on month at 0.4 compared to a forecast of 0.3 and the previous figure of 0.4. On a year on year basis, the Core CPI was reported at 3.8 versus a forecast of 3.7 and the previous figure of 3.9

To recap the market movements, at 08:48 AM there was a paradoxical reaction to CPI with a slight drop in 10yr down 0.4bps at 4.094. Meanwhile, MBS showed an uptick of 3 ticks (.09). By 09:35 AM, the market had reversed the gains convincingly, with 10yr yield up 4.9bps at 4.147 and MBS falling by 5 ticks (.16). At 01:06 PM, the weakest market levels emerged after the auction with the 10yr yielding up 7.2bps at 4.17 and MBS falling by a quarter point. By 03:47 PM, the market was seen moving slightly away from the weakest levels and remained stable during post-trading hours with MBS still down 6 ticks (.19) and 10yr yield up by 6bps at 4.157.

“Analyzing the Steady Performance of MBS Amidst Market Fluctuations: A Recap from March 06, 2024”

The bond market experienced an intriguing day with yields declining to its lowest in over three weeks, despite several noteworthy influences. Notably, most of this improvement seemed detached from these influences, leaving them with little credence. The occurrence of job opening data (JOLTS) and a testimony from Powell marked the day, the most conspicuous market influence being a chain of headlines and trading stops revolving around NYCB, although these eventually nullified each other. Consequently, we witness a humble yet significant advance preceding Thursday’s ECB announcement and Friday’s employment report.

Economic Data and Events:

ADP Employment – Recorded at 140k compared to the predicted 150k; it’s previous mark was 107k.

Job Openings – Showed a count of 8.863m against a forecast of 8.9m, a decline from the earlier 9.026m.

Market Movement Overview:

09:00 AM – Mildly weaker overnight movement with gains initiating at 7am. A 2.8bps decline in the 10yr yield at 4.123, MBS marking an increase of 8 units. No significant impact noted from ADP and Powell’s remarks.

10:01 AM – Muted response to JOLTS with 10yr declining 4.7bps to 4.104 and MBS rising 9 ticks (.28).

12:31 PM – Augmented gains due to NYCB’s circuit breaker at 11:53am ET. MBS up to 10 ticks (.31) with a 6bps drop in 10yr yield landing at 4.092.

02:50 PM – Noticeable volatility resulting from NYCB headlines. A retreat of MBS from highs, marking a quarter point rise for the day; 10yr experiencing a fall of 4.3bps, ending at 4.108.

“Analyzing Market Movement and Mortgage Rate Impact – A March 2024 Recap”

The main event in today’s economic data round-up was the unveiling of the ISM Non-Manufacturing data, although its impact wasn’t as pronounced as expected. This could be attributed to the markets exhibiting significant vitality even before the data’s release. Various factors such as European economic data, risk-averse trading due to concerns about NYCB, and a rebound in equities could explain this pre-data rally. Despite accounting for only a fourth of the overall market movement, the ISM data still dominated today’s events in terms of trading volume and bond market momentum. It is notable that bonds continued to perform well as yields hit a 3-week low.

Key Economic Data

ISM Non-Manufacturing: 52.6, lower than expected (53.0 forecast, 53.4 previous)

ISM Prices Paid: 58.6, down from 64.0 previously

ISM Employment: 48.0, a decrease from 50.5 previously

Market Performance Recap

09:36 AM – noticeable strength was shown overnight with additional purchases made at the opening. The 10-year yield was down 6.3bps to 4.154, and MBS rose 7 ticks (.23)

10:39 AM – post-ISM data release showed strength, albeit at a moderated pace. MBS increased 9 ticks (.28) and the 10-year yield reduced 7.4bps to 4.143

02:30 PM – the markets navigated a course sideways to a minor weakening at midday, but quickly returned to peaking levels. MBS was up 11 ticks (.34) and the 10-year yield dropped 8.2bps to 4.135.

“Exploring the Spectrums of Real Estate and Finance: An Insight into Current Mortgage Affairs”

Watching the snow fall in the Sierra, I suggest that if there’s one video worth your time this week, it’d be this 15-second masterpiece explaining our banking system. Give it a listen, you might find yourself replaying it a couple of times, even get your kids to make sense of it. Reflecting back on history, the bank count in the United States, since its peak of 30,456 in 1921, has drastically dropped to just 4,377 by the end of 2020 – a staggering 86% fall. This invokes worry among numerous residential lenders fretting over the possibility of stepping into the same sinkhole. However, on the brighter side, the United States is setting records in oil production, crunching out an unprecedented 13 million barrels per day. This feat has led to an economic downturn for OPEC+ nations, dethroning their global market stake to a new low of 48 percent. An intriguing aspect to be noted here is inflation and its effect on mortgage rates, suggesting captivating months ahead considering the expectation of two octogenarians competing for the paramount position. Featuring the nCino Mortgage Suite, this week’s podcast is designed for the evolving mortgage lender, encompassing three central products – nCino Mortgage, nCino Incentive Compensation, and nCino Mortgage Analytics. An interesting session with Kate Wood from Nerdwallet delivers advice on housing market availability and tips for aspiring home buyers. Lenders and Brokers can avail the benefit of services, products, and software.

“Exploring the Nuances of Treasury Volatility and MBS Underperformance: A Recap of Market Events – February 29, 2024”

The day started with the bonds on a softer note, yet they made a comeback following the 8:30 am economic data release. The driving forces behind this were not solely the Core PCE figures meeting expectations but also sustained claims numbers being higher than anticipated. The rally gained more momentum about an hour later when Chicago PMI figures were reported to be weaker than expected. However, the gains faded gradually throughout the day following a straight-line trajectory. Despite marginal improvements recorded, this had no impact on moving the rates or yields from their unusually tight, current trajectory.

Economic Data / Activities:

Unemployment Claims:
Reported: 215k, Forecast: 210k, Previous: 202k

Continued Claims:
Reported: 1905k, Forecast: 1874k, Previous: 1860k

Core PCE m/m:
Reported: 0.4, Forecast: 0.4, Previous: 0.2

Core PCE y/y:
Reported: 2.8, Forecast: 2.8, Previous: 2.9

Chicago PMI:
Reported: 44, Forecast: 48, Previous: 46

Market Movement Overview:

08:54 AM: The market was moderately weaker overnight but regained strength following the data release. The 10-year yield was almost unchanged at 4.266. MBS was lower only by one tick (0.03).

09:52 AM: After the Chicago PMI release, it reported additional profits. The 10-year yield was down 1.8 bps at 4.246. MBS increased by two ticks (0.06).

01:27 PM: Despite being off the best level, the market was still stronger. MBS increased by three ticks (0.09), with the 10yr down 1.2bps at 4.252.

03:07 PM: The market was weakening heading into the 3 pm close (month-end), and was barely positive with MBS up one tick (0.03) and the 10yr half a bp down at 4.259.

04:48 PM: Although the market weakened for a short period at 4 pm, it recovered back to the levels in line with the previous update.

“Exploration of Market Fluctuations: Mortgage News Daily Recap, February 23, 2024”

Friday turned out to be an unexpectedly robust day for the bond market, with the most impressive rally of the week occurring at the long end of the yield curve. The surge was influenced in part by early trading in European bonds, but was likely given an extra lift by the quarterly rollover in Treasury futures. The losses the 10-year Treasuries sustained on Wednesday and Thursday were entirely offset, though these initial losses had been on track to breach the 4.32% technical ceiling. As a result, Friday’s rally is most adequately described as maintaining the broader pattern of lateral movement.

Summary of Market Developments

10:01 AM: The market was slightly stronger overnight, with gains continuing into early trading. Mortgage-backed securities (MBS) increased by 6 ticks (.19), and the 10-year yield dropped by 3.4 bps to 4.297.

01:35 PM: The market saw consistent gains throughout the morning. Federal Reserve comments did not have a negative impact. The 10-year yield further declined by 8.5 bps to 4.246, and the MBS increased by 3/8ths.

03:16 PM: The market stabilized near peak levels, with MBS nearly up by 3/8ths and the 10-year yield dropping by 7.1 bps to 4.26.

“Revealing Insights: A Review on Bond Market Sharp Moves and MBS RECAP for February 22, 2024”

Continued Momentum in the Drift

Despite the recent Jobless Claims data suggesting a more robust picture than anticipated, the bond market revealed only a minimal impact. This comes even though the reference period for this data coincides with the up-and-coming NFP number. Instead, market participants showed a greater concern towards the decline in price pressures reported in the S&P PMI data, hinting at a level of inclination towards other secondary data that might present an alternative perspective to the latest CPI. However, this depends on the data’s initial favorability. Still, even with favorable data, the market must wait for at least a week for the first potential indicator (PCE), followed by another week for any high-tier data. As a result, bonds remain on a drifting trajectory, and not the enjoyable type.

Economic Data / Incidents

Unemployment Claims:
201k compared to a forecast of 218k, previous figures stand at 213k

Ongoing Claims:
1862k compared to a forecast of 1885k

S&P Services PMI:
51.3 compared to 52.0 forecasted
Notably, “the increase in input prices was the slowest since October 2020”

Summary recap of Market Activity

08:45 AM – After a slight slump overnight, a swift sell-off occurred following the Claims data. However, recovery appears to be on the horizon. 10yr now up by only 1bp at 4.329, with MBS falling by an eighth.

09:57 AM – The market bounces back into the green following PMI data. MBS increased by 2 ticks (.06), with 10yr decreasing by 1.2bps at 4.307.

12:29 PM – Ambiguous market movements, with a return to a weaker positioning. The 10yr is up by 1.2bps at 4.331, and MBS down by 1 tick (.03).

02:39 PM – Market remains relatively steady, with a minor MBS drop of 1 tick (.03). Meanwhile, 10yr rises by less than 1bp at 4.327.

“Inside the Mortgage Market: An Exceptional Day of New Developments – A Recap of February 22, 2024”

Current rates depend on data, primarily the Consumer Price Index (CPI) and the significant job reports. However, these aren’t scheduled for release today; instead, we have a suggestive clue regarding potential employment trends from the weekly unemployment claims data. This usually overlooked data becomes significant, particularly when considering the report that includes data from the 12th of the month. The job reports (BLS Employment Situation / nonfarm payrolls) utilize data gathered during this period. With this perspective, the bond market effectively disregarded a better-than-expected result this morning, gaining comfort from the S&P PMI data released an hour later. Despite a slight uptick, bond yields are subtly increasing as the afternoon approaches, for unknown reasons.

This upward trend is happening at critical levels, leading some experts to perceive this as a failure to find support at the 4.32% marker. Nevertheless, it’s premature and unclear in the broader context to declare any conclusions.

“Understanding the Complexities of MBS Market Dynamics: A Recap of Current Trends”

The beginning of the week saw bond markets open sluggishly, even though this week has fewer business days. In Asia, yields initially started a little higher but managed to return back to ‘neutral’ just as U.S. trading began, eventually shifting to slightly stronger levels at the time of European trading closure. The later half of trading in the U.S was dominated by a stronger selling sentiment, but this wasn’t significant enough to place bonds in a weaker position by the 3pm CME closure. Notably, this all transpired within a tight enough bandwidth to discount any deep analysis.

Snapshot of Market Fluctuations

At 09:59 AM, a gradual rise had been observed overnight and during U.S. trading hours. The 10-year yield was down by 2.5 basis points at 4.256. MBS showed an increase by 3 ticks (.09).

By 11:43 AM, the market continued to display modest improvements with MBS improving an additional 6 ticks (.19) and the 10 year yield dropping slightly to 4.252.

By 02:55 PM, the weakest levels of the day were recorded, but overall, it remained slightly in the positive territory. MBS were again up by 3 ticks (.09) and the 10-year yield decreased by half a basis point at 4.275.

By 03:42 PM, there was no significant movement either way and MBS continued to be up by 3 ticks (.09). The 10-year yield finally settled down 1 basis point at 4.271.

“Deciphering Today’s Mortgage Backed Securities Market: An Analysis of Events and Trends – February 20, 2024”

Towards the end of 2023, bonds were clearly on a defined path, but experienced a minor, sensible adjustment at the start of 2024. With respect to 10-year yields, the adjustment apparently concluded after stopping at a peak of 4.19%. However, data from the previous week extended this range by over 10 basis points. Presently, the market seems to be guided by “data dependence”. So, in a situation void of new data, the only option is to patiently await new developments.

Significant data is notably missing in this shortened festive week. The only attention-grabbing event on the calendar is the release of the Federal Reserve’s minutes on Wednesday. However, it’s unclear what new information could be revealed that hasn’t been previously covered in recent addresses. In light of this, unless new unexpected factors emerge, the only option is to keep an eye on the range limits overhead while patiently awaiting new developments.

On a technical note, one could consider whether the 10-year yield’s ceiling of 4.32% will be breached before the two week upward trend (represented by the yellow line in the graph) as a way to pass the time. While the predictions are far from precise, they could provide some insight into the possible direction of a breakout. Ideally, you would want the yield to break below the yellow line if you prefer not to see a rise in rates.