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20th December, 24
Not as Bad as it Could Have Been
Not as Bad as it Could Have Been After Wednesday's Fed-driven sell-off, it was unlikely if not impossible that bonds wouldn't end up saying they had a bad week. That is certainly still the case, but after Friday, it's not as bad as it could have been. PCE inflation came in at 0.1% at the core level, month over month. If inflation repeated that performance for 12 months, annual inflation would be below the 2.0% target. Headline inflation is even lower and has been doing even better in terms of getting back to a target trajectory. Bond traders are largely able to
Not as Bad as it Could Have Been
Not as Bad as it Could Have Been After Wednesday's Fed-driven sell-off, it was unlikely if not impossible that bonds wouldn't end up saying they had a bad week. That is certainly still the case, but after Friday, it's not as bad as it could have been. PCE inflation came in at 0.1% at the core level, month over month. If inflation repeated that performance for 12 months, annual inflation would be below the 2.0% target. Headline inflation is even lower and has been doing even better in terms of getting back to a target trajectory. Bond traders are largely able to
20th December, 24
Mortgage Rates Recover Some of The Lost Ground
The week's big story is still the big jump in rates that took place after Wednesday's Fed announcement. And while rates remain noticeably elevated on the week due to that jump, they're set to end the week at slightly less elevated levels. Credit this morning's inflation data for that development! Part of Wednesday's Fed Day drama involved a renewed focus on inflation reports. That added to anxiety because Friday's PCE inflation index is one of the two big inflation reports that come out each month. The bond market that underlies day-to-day interest rate movement is most focused on
Mortgage Rates Recover Some of The Lost Ground
The week's big story is still the big jump in rates that took place after Wednesday's Fed announcement. And while rates remain noticeably elevated on the week due to that jump, they're set to end the week at slightly less elevated levels. Credit this morning's inflation data for that development! Part of Wednesday's Fed Day drama involved a renewed focus on inflation reports. That added to anxiety because Friday's PCE inflation index is one of the two big inflation reports that come out each month. The bond market that underlies day-to-day interest rate movement is most focused on
20th December, 24
Stronger Start After Cooler PCE, But Don't Expect Miracles
This week's biggest to-do in terms of economic reports was this morning's PCE inflation data. The fact that the Fed just said it was shifting its primary focus away from the labor market and back toward inflation made PCE all the more interesting. Thankfully, it came out lower than expected at the core level, both in monthly and annual terms (a nice development considering yesterday's Q3 numbers were higher than expected). The unrounded monthly number of 0.11 was very close to the rounded 0.1%. Bonds rallied in response, but the gains have been modest in
Stronger Start After Cooler PCE, But Don't Expect Miracles
This week's biggest to-do in terms of economic reports was this morning's PCE inflation data. The fact that the Fed just said it was shifting its primary focus away from the labor market and back toward inflation made PCE all the more interesting. Thankfully, it came out lower than expected at the core level, both in monthly and annual terms (a nice development considering yesterday's Q3 numbers were higher than expected). The unrounded monthly number of 0.11 was very close to the rounded 0.1%. Bonds rallied in response, but the gains have been modest in
19th December, 24
Fairly Uneventful Follow-Up to Fed Day
Fairly Uneventful Follow-Up to Fed Day Considering everything that transpired yesterday, today's follow-up was about as calm as we could have hoped for. Bonds lost ground, but the losses were focused on the long end of the curve. That limited the damage for MBS, which have been hanging out with the middle of the curve these days. AM econ data was a mixed bag despite appearing to be unfriendly at first glance. If it had any ill effect, it was minimal. In the bigger picture, Thursday simply represented a leveling-off after Wednesday's rout. Friday brings monthly PCE
Fairly Uneventful Follow-Up to Fed Day
Fairly Uneventful Follow-Up to Fed Day Considering everything that transpired yesterday, today's follow-up was about as calm as we could have hoped for. Bonds lost ground, but the losses were focused on the long end of the curve. That limited the damage for MBS, which have been hanging out with the middle of the curve these days. AM econ data was a mixed bag despite appearing to be unfriendly at first glance. If it had any ill effect, it was minimal. In the bigger picture, Thursday simply represented a leveling-off after Wednesday's rout. Friday brings monthly PCE
19th December, 24
If You're Struggling to Understand This Week's Mortgage Rate Spike, This is For You
We received some anonymous feedback regarding recent rate commentary that serves as a good reminder that not everyone may be picking up what we're putting down, or worse yet, picking up things that we never put down in the first place. We spend a lot of time talking about how the bond market prices in the impact of Fed rate cuts on the occasions where those rate cuts are expected with a high probability--as was the case with yesterday's cut. Specifically, Tuesday's rate commentary said: " The market is already well aware that the Fed is cutting rates tomorrow and those
If You're Struggling to Understand This Week's Mortgage Rate Spike, This is For You
We received some anonymous feedback regarding recent rate commentary that serves as a good reminder that not everyone may be picking up what we're putting down, or worse yet, picking up things that we never put down in the first place. We spend a lot of time talking about how the bond market prices in the impact of Fed rate cuts on the occasions where those rate cuts are expected with a high probability--as was the case with yesterday's cut. Specifically, Tuesday's rate commentary said: " The market is already well aware that the Fed is cutting rates tomorrow and those
19th December, 24
Highest Existing Home Sales Since March
Just in time for the big jump in interest rates seen after yesterday's Fed announcement, the latest Existing Home Sales data from the National Association of Realtors (NAR) shows sales at the highest seasonally adjusted pace since March. Compared to the same time last year, sales are up 6.1%--the best year over year improvement since June 2021. To be fair to the data, it is definitely looking better than most of the past year and a half. It's also true that adding 1 to 1 is a 100% increase while adding 1 to 100 is only a 1% increase. In other words, it's great that we're up 6.1% year
Highest Existing Home Sales Since March
Just in time for the big jump in interest rates seen after yesterday's Fed announcement, the latest Existing Home Sales data from the National Association of Realtors (NAR) shows sales at the highest seasonally adjusted pace since March. Compared to the same time last year, sales are up 6.1%--the best year over year improvement since June 2021. To be fair to the data, it is definitely looking better than most of the past year and a half. It's also true that adding 1 to 1 is a 100% increase while adding 1 to 100 is only a 1% increase. In other words, it's great that we're up 6.1% year
19th December, 24
Non-QM Servicing, HELOC, POS Products; FHA News; Rate React to Fed's New Dots
When I see a headline with “housing” and “crash” in it, I think it is merely clickbait, and the author is trying to attract readers. For example: The Office of the Comptroller of the Currency (OCC) reported on the performance of first-lien mortgages in the federal banking system during the third quarter of 2024. The OCC Mortgage Metrics Report, Third Quarter 2024, showed that 97.4 percent of mortgages included in the report were current and performing at the end of the quarter, a slight increase from 97.3 percent one year earlier. Borrowers have the ability to repay, there’s equity,
Non-QM Servicing, HELOC, POS Products; FHA News; Rate React to Fed's New Dots
When I see a headline with “housing” and “crash” in it, I think it is merely clickbait, and the author is trying to attract readers. For example: The Office of the Comptroller of the Currency (OCC) reported on the performance of first-lien mortgages in the federal banking system during the third quarter of 2024. The OCC Mortgage Metrics Report, Third Quarter 2024, showed that 97.4 percent of mortgages included in the report were current and performing at the end of the quarter, a slight increase from 97.3 percent one year earlier. Borrowers have the ability to repay, there’s equity,
19th December, 24
Weaker Momentum Continues, Regardless of Data
The takeaway from yesterday's Fed announcement was twofold. First, the Fed is much closer to being done cutting rates than it anticipated in September. This accounts for the sharp sell-off in bonds and stocks. The second takeaway is simply a confirmation of our recent change of heart regarding inflation data. Powell noticeably downplayed the need to obsess over the labor market, thus placing the main focus on inflation yet again. The shift in the Fed's inflation outlook for 2025 confirmed the concern. In short, the takeaway continues to be that rates can't move meaningfully
Weaker Momentum Continues, Regardless of Data
The takeaway from yesterday's Fed announcement was twofold. First, the Fed is much closer to being done cutting rates than it anticipated in September. This accounts for the sharp sell-off in bonds and stocks. The second takeaway is simply a confirmation of our recent change of heart regarding inflation data. Powell noticeably downplayed the need to obsess over the labor market, thus placing the main focus on inflation yet again. The shift in the Fed's inflation outlook for 2025 confirmed the concern. In short, the takeaway continues to be that rates can't move meaningfully
18th December, 24
Dots and Powell Were Much Less Friendly Than Markets Expected
Dots and Powell Were Much Less Friendly Than Markets Expected We knew the bond market was expecting a hawkish shift in the dot plot (the chart that shows each Fed member's expectation for the Fed Funds Rate in the coming months/years), and while there is now easy way to know exactly how big the expected shift was, it was clearly not as big as the shift we actually saw! The median dot moved from the low 3% range for the end of 2025 to just under 4%. On top of that, Powell's press conference offered no reprieve as he confirmed the Fed was entering a new policy-making phase marked by
Dots and Powell Were Much Less Friendly Than Markets Expected
Dots and Powell Were Much Less Friendly Than Markets Expected We knew the bond market was expecting a hawkish shift in the dot plot (the chart that shows each Fed member's expectation for the Fed Funds Rate in the coming months/years), and while there is now easy way to know exactly how big the expected shift was, it was clearly not as big as the shift we actually saw! The median dot moved from the low 3% range for the end of 2025 to just under 4%. On top of that, Powell's press conference offered no reprieve as he confirmed the Fed was entering a new policy-making phase marked by
18th December, 24
Mortgage Rates Jump Abruptly Higher After The Fed's Rate Cut
If anyone needed any further convincing that a Fed rate cut is no guarantee of lower mortgage rates, today is a great piece of evidence. Perhaps "great" is the wrong word. There was nothing great about the mortgage rate movement following today's Fed rate cut. The average lender is at least 0.20% higher than earlier this morning. Lenders are still in the process of adjusting their rate sheets, so the total damage could vary slightly by the time we're able to run the full numbers. Either way, the top tier conventional 30yr fixed rate will easily be back over 7% for the
Mortgage Rates Jump Abruptly Higher After The Fed's Rate Cut
If anyone needed any further convincing that a Fed rate cut is no guarantee of lower mortgage rates, today is a great piece of evidence. Perhaps "great" is the wrong word. There was nothing great about the mortgage rate movement following today's Fed rate cut. The average lender is at least 0.20% higher than earlier this morning. Lenders are still in the process of adjusting their rate sheets, so the total damage could vary slightly by the time we're able to run the full numbers. Either way, the top tier conventional 30yr fixed rate will easily be back over 7% for the
