Morning Market Update: MBS Slide as Treasury Yields Rise

As the new week progresses, today’s market remains relatively stagnant. Overnight, yields saw a slight increase, although calling it significant might be an overstatement given the 10-year yield’s movement was under 3 basis points. During domestic trading hours, activity has been minimal, with yields fluctuating within an even narrower 1 basis point range, roughly between 4.29% and 4.30%.

Mortgage-Backed Securities (MBS) have shown more activity, with 6.0 coupons returning to positive territory after a sluggish start.

The performance of the Treasury yield curve sheds some light on this development, as 2-year yields remain steady while 10-year yields are up by 1.5 basis points for the day.

With little happening, attention turns to Federal Reserve Chair Powell’s congressional testimony at 10 am, which could potentially provide market-moving insights. Additionally, the Treasury auction cycle begins at 1 pm, though more significant fluctuations are anticipated in tomorrow’s 10-year auction compared to today’s 3-year auction.

Decoding the Latest Trends in Mortgage Rates: July 8, 2024 Update

Since July 1st, mortgage rates have been declining daily, except for the first day of the month. However, this trend spans only four business days. Recent rate drops have been modest, so most borrowers still receive the same interest rates as last Friday. Currently, the average top-tier conventional 30-year fixed mortgage rate hovers just above 7%. A significant change is expected with the release of the Consumer Price Index (CPI) data this Thursday. The CPI is a crucial indicator for mortgage rates, and this week’s report could confirm the positive trend seen last month, potentially bringing rates down into the 6% range. Other factors, such as Fed Chair Powell’s Congressional testimony, might introduce volatility, but the CPI remains the primary influence on mortgage rates.

Navigating the Mortgage Maze: Expert Insights from Pipeline Press

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Navigating the Mortgage Market: Key Insights for July 8, 2024

As the new week kicks off, bonds are settling into a comfortable range. This stability is commendable given that some weakness is typically expected at the beginning of Treasury auction weeks. Nonetheless, current trading levels still reflect a slight decline compared to the yield lows seen in late June. Although the overnight session showed minor weakness, domestic traders quickly corrected this by the 8:20 AM CME open, bringing levels back to neutral. There are no major economic reports scheduled today. The focus will largely be on Fed Chair Powell’s semi-annual congressional testimony set for Tuesday and Wednesday, while Thursday’s Consumer Price Index (CPI) data remains the main event to anticipate.

Navigating Market Shifts: Key Takeaways from Early July MBS Trends

Today’s market evolution stayed true to earlier expectations. The latest jobs report revealed a notable softening compared to the prior month across most metrics, despite the headline nonfarm payroll figure slightly exceeding predictions. Once revisions were factored in, the labor market trend shifted from appearing surprisingly robust to understandably softer under current interest rate conditions. This aligns with what many anticipated given the rate environment. Consequently, the bond market responded with a composed and significant rally, reinforcing its commitment to the Fed’s data-driven approach. Overall, it was a satisfactory reaction to the jobs report, setting the stage for the upcoming week’s CPI data.

Economic Data and Events:

Nonfarm Payrolls came in at 206,000 versus an expected 190,000, though last month’s figures were revised down from 272,000 to 218,000.

The Unemployment Rate stood at 4.1%, slightly higher than the anticipated 4.0% and the previous month’s 4.0%.

Wages grew by 0.3%, which matched forecasts but was lower than the previous month’s 0.4%.

Market Movement Recap:

08:47 AM: Bonds modestly strengthened overnight with further gains after the nonfarm payroll data. The 10-year yield fell by 6

Navigating the Summer Spike: Understanding the Latest Mortgage Rate Trends

Although the average 30-year fixed mortgage rate hasn’t yet dipped below 7%, it did decrease this past Friday, settling lower than the previous week’s level. This decrease contradicts major weekly rate surveys that indicated a notable rise, but these surveys were published before the latest jobs report. Known officially as The Employment Situation, this jobs report is one of the two most critical monthly economic indicators in the U.S. Economic data is always crucial, but it holds even more significance now as the Federal Reserve and the market are closely watching for signs of slowing economic growth and inflation that could justify a rate cut by the Fed.

The market typically adjusts rates in anticipation of the Fed’s moves. Despite not being particularly weak, the recent jobs report marked a clear slowdown compared to the prior month’s data. This shift led the bond market to lower yields moderately during the morning. Since bond yields influence mortgage rates, a decline in yields generally points to lower mortgage rates. While Friday’s dip wasn’t substantial, it was meaningful in that it keeps the possibility open for an upcoming major economic report to provide a clearer signal about the Fed’s potential rate cuts. The next key report, the Consumer Price Index (CPI), is scheduled for release next Thursday morning.

How the Latest Economic Data is Shaping Mortgage Rate Trends

Today’s market strategy was relatively straightforward, with bonds expected to respond to the direction indicated by the jobs report. The complexity would have only arisen if there had been conflicting signals, such as a substantial increase in job numbers paired with a significant drop in the unemployment rate. However, the job count did surpass expectations, though not dramatically, and was tempered by considerably large negative revisions. Unemployment experienced a slight uptick, and wage growth matched predictions at 0.3%, down from the previous 0.4%. Overall, this points to a labor market returning to normal with slight signs of weakening, rather than being surprisingly strong as suggested by the previous month’s jobs data. Bonds reacted positively, recovering all the losses incurred since last week’s presidential debate.

It’s worth noting that while the presidential debate drew much attention and was blamed for last Friday’s bond sell-off, many analysts preferred the explanation centered around month-end positioning.

Understanding Economic Indicators: How Job Growth and Inflation Influence the Mortgage Market

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In broader lending news, the outlook isn’t too promising. Data from Curinos reveals that the funded mortgage volume for June 2024 fell by 13 percent compared to the previous year and experienced a 5 percent decline from the previous month. The average 30-year conforming retail funded rate in June 2024 stood at 7.11, showing a slight increase of 1 basis point since May 2024 and a significant rise of 66 basis points from June 2023. Curinos collects this data directly from a substantial number of lenders to ensure accuracy.

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Understanding the Latest Trends: Navigating Mortgage Rates in July 2024

Currently, one of the most frequently used terms by the Federal Reserve in relation to its rate-setting policy is “data dependent.” Although the Fed doesn’t have direct control over mortgage rates, the bond market reacts to the same economic data that the Fed considers important. Today, the ISM Services index report, which is a significant driver of bond market activity and, consequently, interest rates, came in much weaker than anticipated. Typically, weaker data leads to lower interest rates, all other factors being constant. As a result, bonds saw immediate improvement following the report, enabling mortgage lenders to offer reduced rates. Some lenders, who had already set their rates for the day, issued positive reprices in response. While the bond market will be closed for the holiday tomorrow, attention will quickly shift to Friday’s crucial economic release: the major jobs report.

Future-Proofing Your Mortgage Business: Key Trends and Insights for 2024

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While we’re on the topic of numbers, it’s worth noting that organizations like the FHFA and CFPB, though deeply embedded in the American financial landscape, aren’t as historic as these early figures. They have, however, recently released updated data from the National Survey of Mortgage Originations. For those interested in financial compliance, there’s also accessible real-time information on violation penalties.

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