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17th September, 25
Fed Day Selling Spree as Press Conference Trumps The Dots
Powell Press Conference Trumps The Dots, Sparking Moderate Sell-Off Of today's Fed events (rate announcement, dot plot, and press conference), it was the dots that were most likely to cause the biggest reaction. That proved to be the case, but only for the 30 minutes leading up to Powell's presser. Bonds had already begun pushing back against the rally by the time Powell started fielding questions. Several of his responses added fuel to the fire. In not so many words, Powell said the dots don't mean the Fed is cutting twice more in 2024 and that the Fed will instead be taking
Fed Day Selling Spree as Press Conference Trumps The Dots
Powell Press Conference Trumps The Dots, Sparking Moderate Sell-Off Of today's Fed events (rate announcement, dot plot, and press conference), it was the dots that were most likely to cause the biggest reaction. That proved to be the case, but only for the 30 minutes leading up to Powell's presser. Bonds had already begun pushing back against the rally by the time Powell started fielding questions. Several of his responses added fuel to the fire. In not so many words, Powell said the dots don't mean the Fed is cutting twice more in 2024 and that the Fed will instead be taking
17th September, 25
Mortgage Rates HIGHER (Not Lower) After Fed Rate Cut
Several things happen on Fed Day--especially on the 4 out of 8 examples with updated rate forecasts from Fed members. The official announcement of a rate cut is typically the least important aspect. In fact, it is usually entirely unimportant in terms of its impact on mortgage rates. Instead, the bonds that determine mortgage rates are much more likely to react to the Fed's dot plot (the chart showing each Fed member's rate forecast over the next few years) and the press conference with the Fed Chair. The dots are released at 2pm at the same time as the rate cut announcement.
Mortgage Rates HIGHER (Not Lower) After Fed Rate Cut
Several things happen on Fed Day--especially on the 4 out of 8 examples with updated rate forecasts from Fed members. The official announcement of a rate cut is typically the least important aspect. In fact, it is usually entirely unimportant in terms of its impact on mortgage rates. Instead, the bonds that determine mortgage rates are much more likely to react to the Fed's dot plot (the chart showing each Fed member's rate forecast over the next few years) and the press conference with the Fed Chair. The dots are released at 2pm at the same time as the rate cut announcement.
17th September, 25
Here's What Changed in The New Fed Announcement
Although swings in net exports continue to affect the data, recent Recent indicators suggest that growth of economic activity moderated in the first half of the year. The Job gains have slowed, and the unemployment rate has edged up but remains low, and labor market conditions remain solid. low. Inflation has moved up and remains somewhat elevated. The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. Uncertainty about the economic outlook remains elevated. The Committee is attentive to the risks to both sides of its dual mandate. mandate
Here's What Changed in The New Fed Announcement
Although swings in net exports continue to affect the data, recent Recent indicators suggest that growth of economic activity moderated in the first half of the year. The Job gains have slowed, and the unemployment rate has edged up but remains low, and labor market conditions remain solid. low. Inflation has moved up and remains somewhat elevated. The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. Uncertainty about the economic outlook remains elevated. The Committee is attentive to the risks to both sides of its dual mandate. mandate
17th September, 25
TBA, DPA Tools; HELOC, 2nd, Jumbo, Non-QM News; Union Home/Sierra Pacific Deal
Today I find myself in Vancouver, WA, splendid in the autumn, to meet with various mortgage folks and especially the Banner Bank mortgage crew, covering much of the West. Artificial intelligence is on most agendas these days, and I received this note. “I read in your Commentary that AI use in large companies is decreasing. AI is like a GPS. I used to know how to get everywhere, but young drivers just plug it into a GPS. Without it, they are lost… and don’t know how to give directions. I learned loan programs, down payment programs and watched rates, etc. Now new hires plug the loan
TBA, DPA Tools; HELOC, 2nd, Jumbo, Non-QM News; Union Home/Sierra Pacific Deal
Today I find myself in Vancouver, WA, splendid in the autumn, to meet with various mortgage folks and especially the Banner Bank mortgage crew, covering much of the West. Artificial intelligence is on most agendas these days, and I received this note. “I read in your Commentary that AI use in large companies is decreasing. AI is like a GPS. I used to know how to get everywhere, but young drivers just plug it into a GPS. Without it, they are lost… and don’t know how to give directions. I learned loan programs, down payment programs and watched rates, etc. Now new hires plug the loan
17th September, 25
What to Expect From The Fed Today
The Fed rate announcement is at 2pm ET. A single 25bp rate cut is fully priced in to the bond market and that cut will not be responsible for any volatility you see at 2pm. A 50bp cut is something that some people have mentioned, but not something that is worth realistically considering. 2pm volatility will primarily be a factor of the dot plot (Fed member rate expectations released in the Summary of Economic Projections). In the dots, 2025's year-end level is the most important. Since today's cut takes the FFR (Fed Funds Rate) to 4.125, the question is whether the median 2025 dot will
What to Expect From The Fed Today
The Fed rate announcement is at 2pm ET. A single 25bp rate cut is fully priced in to the bond market and that cut will not be responsible for any volatility you see at 2pm. A 50bp cut is something that some people have mentioned, but not something that is worth realistically considering. 2pm volatility will primarily be a factor of the dot plot (Fed member rate expectations released in the Summary of Economic Projections). In the dots, 2025's year-end level is the most important. Since today's cut takes the FFR (Fed Funds Rate) to 4.125, the question is whether the median 2025 dot will
16th September, 25
Big Shift Toward 5.0 Coupons Continues
Big Shift Toward 5.0 Coupons Continues Mortgage rates have lurched rapidly lower in September as 5.0 UMBS have stolen the show from 5.5 UMBS. As a reminder, there is only a certain range of rates allowed in either bucket. 5.5s go all the way up to 6.625% and investors buying MBS would prefer not to get stuck holding a burning bag of 6.625% loans in a market where those borrowers are already on the edge of being in the money on a refi. Bottom line, it's the fastest/biggest shift in 5.0 outperformance since late 2023, and today's installment brought the spread between the two coupons to the
Big Shift Toward 5.0 Coupons Continues
Big Shift Toward 5.0 Coupons Continues Mortgage rates have lurched rapidly lower in September as 5.0 UMBS have stolen the show from 5.5 UMBS. As a reminder, there is only a certain range of rates allowed in either bucket. 5.5s go all the way up to 6.625% and investors buying MBS would prefer not to get stuck holding a burning bag of 6.625% loans in a market where those borrowers are already on the edge of being in the money on a refi. Bottom line, it's the fastest/biggest shift in 5.0 outperformance since late 2023, and today's installment brought the spread between the two coupons to the
16th September, 25
Mortgage Rates Near 3 Year Lows Ahead of Fed
Mortgage rates dropped sharply lower today relative to the amount of movement in the underlying bond market with the average lender right in line with the lowest levels since late 2022. Because rates are directly tied to the prices of those bonds, the correlation tends to be almost perfect over time. [thirtyyearmortgagerates] But there are always scattered examples of one leap-frogging the other. These inconsistencies can arise for several reasons. In today's case, it happened due to late-day strength in bonds yesterday afternoon coupled with the structure of the underlying mortgage bond
Mortgage Rates Near 3 Year Lows Ahead of Fed
Mortgage rates dropped sharply lower today relative to the amount of movement in the underlying bond market with the average lender right in line with the lowest levels since late 2022. Because rates are directly tied to the prices of those bonds, the correlation tends to be almost perfect over time. [thirtyyearmortgagerates] But there are always scattered examples of one leap-frogging the other. These inconsistencies can arise for several reasons. In today's case, it happened due to late-day strength in bonds yesterday afternoon coupled with the structure of the underlying mortgage bond
16th September, 25
Broker, QC Products; Bank M&A; LOs - Know Your Borrower; Figure's IPO star Mike Cagney Interview
My cat Myrtle was always up for a battle with a lizard in the yard. On a larger scale, the ancient Chinese philosopher Sun Tzu said, “Every battle is won or lost before the battle takes place.” Fed Governor Lisa Cook won the last legal round yesterday in her battle to stay with the Fed. Do you think that companies building a factory in the U.S., as we move toward a factory-based economy with a plant taking 5-10 years to build, will face a battle with local authorities on zoning? Does your company foresee any fair lending battles coming up with regulators? Jeff Naimon from Orrick highlights
Broker, QC Products; Bank M&A; LOs - Know Your Borrower; Figure's IPO star Mike Cagney Interview
My cat Myrtle was always up for a battle with a lizard in the yard. On a larger scale, the ancient Chinese philosopher Sun Tzu said, “Every battle is won or lost before the battle takes place.” Fed Governor Lisa Cook won the last legal round yesterday in her battle to stay with the Fed. Do you think that companies building a factory in the U.S., as we move toward a factory-based economy with a plant taking 5-10 years to build, will face a battle with local authorities on zoning? Does your company foresee any fair lending battles coming up with regulators? Jeff Naimon from Orrick highlights
16th September, 25
Bonds Easily Clearing Last Pre-Fed Hurdle
After last week's CPI data was taken mostly in stride, the only other potential economic data hurdle was this morning's Retail Sales report. Whereas CPI was merely on the hotter side of the consensus, Retail Sales came out unequivocally stronger, with the control group hitting the 6.0% mark in year-over-year terms. Even after subtracting 3% annual inflation, this is a strong economic signal and it was no surprise to see bonds lose ground immediately following the release. It's been more of a surprise to see a reversal of those losses and a return to modestly positive territory less
Bonds Easily Clearing Last Pre-Fed Hurdle
After last week's CPI data was taken mostly in stride, the only other potential economic data hurdle was this morning's Retail Sales report. Whereas CPI was merely on the hotter side of the consensus, Retail Sales came out unequivocally stronger, with the control group hitting the 6.0% mark in year-over-year terms. Even after subtracting 3% annual inflation, this is a strong economic signal and it was no surprise to see bonds lose ground immediately following the release. It's been more of a surprise to see a reversal of those losses and a return to modestly positive territory less
15th September, 25
Uneventful Rally. Retail Sales on Deck
Uneventful Rally. Retail Sales on Deck Bonds began the week on a stronger note, but not for any glaringly obvious reasons. The same was said about Friday's weakness, so perhaps we'll just call it a wash and assume that traders are getting into (or out of) position(s) ahead of this week's Fed Day. Thus morning's NY Fed Manufacturing data fit the rally narrative, but most of the gains were in place beforehand--not to mention the limited track record of impact from that report. Volumes were exceptionally light and volatility was exceptionally low after the initial gains in the AM. Tuesday's
Uneventful Rally. Retail Sales on Deck
Uneventful Rally. Retail Sales on Deck Bonds began the week on a stronger note, but not for any glaringly obvious reasons. The same was said about Friday's weakness, so perhaps we'll just call it a wash and assume that traders are getting into (or out of) position(s) ahead of this week's Fed Day. Thus morning's NY Fed Manufacturing data fit the rally narrative, but most of the gains were in place beforehand--not to mention the limited track record of impact from that report. Volumes were exceptionally light and volatility was exceptionally low after the initial gains in the AM. Tuesday's