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24th June, 26
What's Up With Today's Big Rally? (Spoiler Alert: Quarter-End Rebalancing)
What's Up With Today's Big Rally? (Spoiler Alert: Quarter-End Rebalancing) Stocks went on a tear in Q2 with the S&P up 20% as recently at June 16th. AI-adjacent stocks were up over 50%. Bonds lost ground over the same time. That means the 60/40 stock/bond portfolio targets were thrown way out of whack, at times approaching a 70/30 balance. Gigantic money managers (insurance/pension funds and foreign investment funds) take the last few weeks of a quarter to get that balance back to 60/40. This is accomplished via selling stocks, buying bonds, or both. In today's case it was both, but
What's Up With Today's Big Rally? (Spoiler Alert: Quarter-End Rebalancing)
What's Up With Today's Big Rally? (Spoiler Alert: Quarter-End Rebalancing) Stocks went on a tear in Q2 with the S&P up 20% as recently at June 16th. AI-adjacent stocks were up over 50%. Bonds lost ground over the same time. That means the 60/40 stock/bond portfolio targets were thrown way out of whack, at times approaching a 70/30 balance. Gigantic money managers (insurance/pension funds and foreign investment funds) take the last few weeks of a quarter to get that balance back to 60/40. This is accomplished via selling stocks, buying bonds, or both. In today's case it was both, but
24th June, 26
Mortgage Rates Quickly Approaching 1-Month Lows
Rate momentum shifted noticeably on Wednesday. The underlying bond market saw heavy buying in pre-market trading--likely a result of large-scale quarter-end rebalancing among the largest money managers (i.e. adjusting balance of stocks vs bonds in investment portfolios). Excess demand for bonds = lower rates, all else equal. It also hasn't hurt that oil prices continue declining as bond demand has frequently benefited from the lower implied inflation. The average top-tier 30yr fixed rate fell 0.10% to 6.55--just a hair above June 16th levels of 6.54%. Before that, you'd have to go back to May
Mortgage Rates Quickly Approaching 1-Month Lows
Rate momentum shifted noticeably on Wednesday. The underlying bond market saw heavy buying in pre-market trading--likely a result of large-scale quarter-end rebalancing among the largest money managers (i.e. adjusting balance of stocks vs bonds in investment portfolios). Excess demand for bonds = lower rates, all else equal. It also hasn't hurt that oil prices continue declining as bond demand has frequently benefited from the lower implied inflation. The average top-tier 30yr fixed rate fell 0.10% to 6.55--just a hair above June 16th levels of 6.54%. Before that, you'd have to go back to May
24th June, 26
Retention, Credit, CU Lending, Disaster Analysis Tools; Housing Act to the President; Webcasts
“Why did the Dalai Lama go to Las Vegas? Because he loves Tibet.” It’s 107 F here in Las Vegas. Some would say, “It’s summer, what do you expect?” (No one expected 40 people to die in France trying to escape the heat.) Lenders and servicers are wondering, if push comes to shove about A/C in homes or supplying a local data center with electricity, who will win. My bet is whoever has the money. Your company, and family, has money, and criminals want it. (The term “bad actors” seems weak.) SIFMA’s 26th Annual AML Conference focused on the most pressing issues in financial crimes
Retention, Credit, CU Lending, Disaster Analysis Tools; Housing Act to the President; Webcasts
“Why did the Dalai Lama go to Las Vegas? Because he loves Tibet.” It’s 107 F here in Las Vegas. Some would say, “It’s summer, what do you expect?” (No one expected 40 people to die in France trying to escape the heat.) Lenders and servicers are wondering, if push comes to shove about A/C in homes or supplying a local data center with electricity, who will win. My bet is whoever has the money. Your company, and family, has money, and criminals want it. (The term “bad actors” seems weak.) SIFMA’s 26th Annual AML Conference focused on the most pressing issues in financial crimes
24th June, 26
Quick Rally Toward Key Resistance Just Before The Open
Bonds spend most of the night trading sideways to slightly stronger. Oil prices fell sharply, making it tempting to conclude that's the reason that 10yr yields were almost 7bps lower at 9am. But more than half of the oil rally was over before Treasuries began rallying. There was an obvious and uncommonly large volume spike in Treasuries around 7:50am ET. Oil was still falling at the time. It likely contributed to the bond buying, but not enough that we'd give it primary credit. The nature of the Treasury rally is highly suggestive of massive accounts partaking in quarter-end rebalancing (just
Quick Rally Toward Key Resistance Just Before The Open
Bonds spend most of the night trading sideways to slightly stronger. Oil prices fell sharply, making it tempting to conclude that's the reason that 10yr yields were almost 7bps lower at 9am. But more than half of the oil rally was over before Treasuries began rallying. There was an obvious and uncommonly large volume spike in Treasuries around 7:50am ET. Oil was still falling at the time. It likely contributed to the bond buying, but not enough that we'd give it primary credit. The nature of the Treasury rally is highly suggestive of massive accounts partaking in quarter-end rebalancing (just
23rd June, 26
Mostly Sideways and Lacking Inspiration
Mostly Sideways and Lacking Inspiration Tuesday may as well have been a holiday. Volumes were among the lowest for any day in weeks and the lowest for a Tuesday in several months. The economic calendar was effectively empty and news/headlines had no discernible impact. There was token improvement in the AM hours but that merely served to keep yields in an increasingly narrow consolidation pattern that's been underway for over a month. Market Movement Recap 08:38 AM MBS up roughly an eighth of a point and 10yr down 2.6bps at 4.486. Heavy selling in stocks may be helping 11:50 AM MBS up 6 ticks
Mostly Sideways and Lacking Inspiration
Mostly Sideways and Lacking Inspiration Tuesday may as well have been a holiday. Volumes were among the lowest for any day in weeks and the lowest for a Tuesday in several months. The economic calendar was effectively empty and news/headlines had no discernible impact. There was token improvement in the AM hours but that merely served to keep yields in an increasingly narrow consolidation pattern that's been underway for over a month. Market Movement Recap 08:38 AM MBS up roughly an eighth of a point and 10yr down 2.6bps at 4.486. Heavy selling in stocks may be helping 11:50 AM MBS up 6 ticks
23rd June, 26
Rates Hold Mostly Steady Despite Bond Market Improvement
Mortgage rates may be based directly on the bond market, but the two don't always move in perfect lock-step. Today was a good example of that. Bonds improved enough for rates to move modestly lower according to typical correlation. Instead, the average mortgage lender improved by the smallest possible amount that we register on our daily rate index. When this happens, it's often able to be explained by the timing of intraday volatility in the bond market and that's generally the case this time around. Simply put, yesterday morning's best levels lined up with this morning's weakest levels
Rates Hold Mostly Steady Despite Bond Market Improvement
Mortgage rates may be based directly on the bond market, but the two don't always move in perfect lock-step. Today was a good example of that. Bonds improved enough for rates to move modestly lower according to typical correlation. Instead, the average mortgage lender improved by the smallest possible amount that we register on our daily rate index. When this happens, it's often able to be explained by the timing of intraday volatility in the bond market and that's generally the case this time around. Simply put, yesterday morning's best levels lined up with this morning's weakest levels
23rd June, 26
HELOC, Verification Products; AI Gap; Housing Bill Advances; JPMorganChase on Affordability
Yesterday I published a link to Pennymac Policy Pulse, a newsletter tracking key federal policy developments shaping the housing market and broader U.S. economy. The link went to an old version; above is the link to the most current. (Today’s podcast can be found here and this week’s ‘casts are sponsored by Equifax, a global data, analytics, and technology company, helps mortgage lenders gain the borrower and market insights they need to improve efficiency and make accurate decisions. Access differentiated consumer credit data, powerful consumer and market insights, and income and
HELOC, Verification Products; AI Gap; Housing Bill Advances; JPMorganChase on Affordability
Yesterday I published a link to Pennymac Policy Pulse, a newsletter tracking key federal policy developments shaping the housing market and broader U.S. economy. The link went to an old version; above is the link to the most current. (Today’s podcast can be found here and this week’s ‘casts are sponsored by Equifax, a global data, analytics, and technology company, helps mortgage lenders gain the borrower and market insights they need to improve efficiency and make accurate decisions. Access differentiated consumer credit data, powerful consumer and market insights, and income and
23rd June, 26
Re-Coupling and Range Consolidation
Yesterday's most interesting development was the visible decoupling of bond yields with oil prices. To a lesser extent, one could also lament that mid-morning stock selling failed to benefit bonds, but that's far from a regular correlation these days. In fact, the stock/bond correlation is often reversed when the market is adjusting Fed rate expectations. Today's trading session has seen some re-coupling with yields/oil/stocks all falling together. Some of the bond-specific weakness could have been driven by the official launch of SpaceX's big corporate bond, and there's been a heavy slate of
Re-Coupling and Range Consolidation
Yesterday's most interesting development was the visible decoupling of bond yields with oil prices. To a lesser extent, one could also lament that mid-morning stock selling failed to benefit bonds, but that's far from a regular correlation these days. In fact, the stock/bond correlation is often reversed when the market is adjusting Fed rate expectations. Today's trading session has seen some re-coupling with yields/oil/stocks all falling together. Some of the bond-specific weakness could have been driven by the official launch of SpaceX's big corporate bond, and there's been a heavy slate of
22nd June, 26
What's Up With Bonds Decoupling From Oil, Etc.?
What's Up With Bonds Decoupling From Oil, Etc.? On the average trading day in the past few months, if oil prices were down, and especially if other bond markets were rallying, U.S. bonds were probably rallying too. Today was the opposite and there are no glaringly obvious reasons. It's the sort of trading session where analysts must go hunting for narratives to fit the unexpected trading action. The quarry of such hunts is fairly limited. There's the notion of an "ongoing reaction to last week's Fed announcement" (which we don't love considering there was already a friendly bounce on
What's Up With Bonds Decoupling From Oil, Etc.?
What's Up With Bonds Decoupling From Oil, Etc.? On the average trading day in the past few months, if oil prices were down, and especially if other bond markets were rallying, U.S. bonds were probably rallying too. Today was the opposite and there are no glaringly obvious reasons. It's the sort of trading session where analysts must go hunting for narratives to fit the unexpected trading action. The quarry of such hunts is fairly limited. There's the notion of an "ongoing reaction to last week's Fed announcement" (which we don't love considering there was already a friendly bounce on
22nd June, 26
Mortgage Rates Bounce Back Toward Recent Highs
Mortgage rates gave back the improvement seen last Thursday and broke above last Wednesday's levels to hit the highest mark since June 10th. This isn't a big range in the bigger picture, but it does leave rates near 10-month highs. The move is also a bit counterintuitive given developments in other markets and typical correlations. For instance, On almost any other recent trading day, if oil prices and European bond yields are both moving lower (they are), so are U.S. bond yields and rates. The disconnect may be as simple as an ongoing reaction to last week's Fed announcement which
Mortgage Rates Bounce Back Toward Recent Highs
Mortgage rates gave back the improvement seen last Thursday and broke above last Wednesday's levels to hit the highest mark since June 10th. This isn't a big range in the bigger picture, but it does leave rates near 10-month highs. The move is also a bit counterintuitive given developments in other markets and typical correlations. For instance, On almost any other recent trading day, if oil prices and European bond yields are both moving lower (they are), so are U.S. bond yields and rates. The disconnect may be as simple as an ongoing reaction to last week's Fed announcement which