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AM Rally Completely Erased By The Close
AM Rally Completely Erased By The Close This morning's paradoxical rally lasted 30 whole minutes. Bonds turned around at exactly 9am and proceeded to completely erase the AM gains. There were no compelling macro motivations for the reversal apart from a modest rise in oil prices. While oil price lows and highs perfectly matched bond yields in terms of timing, the bond selling was disproportionately larger. This is highly suggestive of short covering being a component of the morning rally. In other words, traders who had open bets on higher rates simply closed those positions quickly this morning. From that point on, the market was free to trade as it pleased. 2yr/10yr spreads remained mostly flat which suggests broad selling across the curve and no change in the paradoxical sentiment component of the AM rally. Bottom line: there were two rally motivations this morning, and one of them left the bond market open to correction.  Econ Data / Events m/m CORE CPI (Aug) 0.3% vs 0.2% f'cast, 0.2% prev m/m Headline CPI (Aug) 0.4% vs 0.4% f'cast, 0.1% prev y/y CORE CPI (Aug) 2.4% vs 2.4% f'cast, 2.5% prev y/y Headline CPI (Aug) 3.4% vs 3.4% f'cast, 3.4% prev Market Movement Recap 08:45 AM 2 way trading after CPI. MBS up 2 ticks (.06) and 10yr down 1.9bps at 4.947 12:45 PM Off best levels. MBS up 3 ticks (.09) after being up 3/8ths earlier this morning. 10yr still down 1.8bps at 4.947 but up from lows of 4.904. 03:50 PM MBS down 3 ticks (.09) and 10yr up half a bp at 4.97
Mortgage Rates Held Fairly Steady Until Late in The Day
Looked at in a vacuum, and up until the last few hours of the day, Friday was no better or worse than the average day over the past several months. Compared to yesterday morning's levels, the average lender was 0.01% higher--a small enough move to be effectively considered "unchanged."  This expanded to 0.05% in the last few hours as multiple lenders increased rates. In terms of big-picture benchmarks, the increase officially brings rates to their highest levels since early 2025. To be clear, we were just barely lower than May 2025 levels yesterday. Now we're in line February 2025 levels. The intraday market movement was interesting. The bond market (which underlies mortgage rate movement) actually improved this morning even though Fed rate hike expectations increased following a slightly hotter inflation reading in this morning's economic data. This is an uncommon pattern. There are two ways to look at it. First, longer-term rates may have been encouraged by the uptick in Fed rate hike expectations because that provided reassurance that Fed was more likely to take steps to combat higher inflation. In other words, some of the upward pressure in longer-term rates is thought to have been driven by fear of Fed inaction. If this morning's inflation data was hot enough to increase the odds of action, but not so hot as to cause a material change in the inflation outlook, it's the perfectly warm bowl of porridge. In OTHER other words, yes! There's a scenario where longer-term rates (things like mortgages and 5-10yr Treasury yields) actually WANT the shortest-term rates (like the Fed Funds Rate) to move higher.
Existing Home Sales Dip Below 4 Million as Inventory Builds
Existing-home sales slipped in August, falling below the 4 million annualized pace for the first time since June 2025, while a sharp increase in inventory gave buyers more options and pushed the supply of homes to its highest level in more than a decade. The National Association of REALTORS® reported a 2.0% decline in sales from July to a seasonally adjusted annual rate of 3.98 million , while sales were 1.2% lower than a year earlier. “Mortgage rates and home sales move in opposite directions, so it's not surprising to see a mild dip in home buying activity due to high mortgage rates,” said NAR Chief Economist Lawrence Yun. He noted that sales are still 1.6% higher year-to-date through the first eight months of the year, with wage growth and job creation helping to support demand despite elevated borrowing costs. Inventory provided a more encouraging development for buyers. Total housing inventory rose to 1.62 million units , up 3.2% from July and 5.9% from a year ago. It was the first time since November 2019 that inventory exceeded 1.6 million units. The increase in supply pushed the market to a 4.9-month supply , up from 4.6 months in both July and August 2025. Yun noted that the current level is the highest in more than ten years and should give buyers more room to negotiate. Despite higher inventory, home prices continued to climb, although the pace of appreciation remained modest. The median existing-home price increased to $429,100 , up 1.6% from August 2025 and marking the 38th consecutive month of year-over-year price increases.
Refi Demand Declining Even Before Most Recent Rate Spike
Mortgage application activity pulled back last week, with a sharp decline in refinancing more than offsetting relatively stable purchase demand as mortgage rates moved higher. The Mortgage Bankers Association (MBA) reported a 2.7% decrease in total application volume on a seasonally adjusted basis for the week ending September 4. Purchase applications were little changed, slipping just 0.2% from the previous week on a seasonally adjusted basis. On an unadjusted basis, purchase activity fell 3%, but remained 4% higher than the same week one year ago, earning it's spot as the one positive note for this week's report. Refinancing was a different story. The Refinance Index fell 6% from the previous week and was 25% below year-ago levels, reaching its slowest weekly pace since May 2025. Refinances also accounted for a smaller portion of overall mortgage activity, with the refinance share falling to 40.9% from 41.8% the previous week. Notably, this data was collected before this week's sharpest rate spikes, so this trend will likely accelerate next week. "Mortgage rates moved higher last week, driven by ongoing investor concerns over inflation and the federal budget deficit," said Joel Kan, MBA's Vice President and Deputy Chief Economist. Kan noted that the 30-year fixed rate reached 6.85%, its highest level since June 2025 and 36 basis points above the same time last year.
AI Warehouse, Compliance Education Tools; Rocket's Limits; Who is Prepaying; Inflation = Higher Rates
Most of us 30 years old and older have tales about where they were and what they did 25 years ago. Being in capital markets, and selling MBS, for over 40 years, I knew people who died in New York that day. That said, as an industry, we’re very good at looking forward to, and planning for, the future. Minority home ownership is something every major lender is witnessing. For example, on Monday, September 14, NAHREP and the Hispanic Wealth Project will unveil the 2026 State of Hispanic Wealth Report on Latino economic progress. More than 1.2 million Hispanic households have reached millionaire status, with total Hispanic household wealth more than tripling since 2014. Hispanic households drove all net U.S. homeownership growth in 2025, reaching a record 10.2 million owner-households; real estate remains the largest pillar of Hispanic wealth at 45.5 percent. “For the first time, the report devotes a full section to the risks federal policy changes from the current Administration pose to this progress.” (Today’s podcast can be found here. This week’s ‘casts are sponsored by NFTYDoor, the MLO's favorite HELOC platform. A broad buy box and hands-on mortgage expertise mean more loans close, faster, for banks, credit unions, and brokers. Clean files close in as little as zero days. Today’s has an interview with Agile’s Greg Vacura on connecting mortgage lenders and broker-dealers to make MBS trading faster, more efficient, transparent, and less reliant on phone-based processes.)
Paradoxical Rally in Bonds Thanks to Higher Fed Hike Odds
We've been saying for a while that the longer end of the bond market really wants to see the Fed get serious about fighting inflation. This is why yields spiked on July 29th when the Fed held rates steady and Warsh said he'd let the bond market do the heavy lifting. Now today, we have back-to-back inflation reports that resulted in Fed Funds Futures pricing in a 90% chance of a hike at next week's meeting. Fed Funds Futures are the only thing that's unequivocally selling off this morning. 2yr Treasuries (heavily impacted by Fed expectations) are mixed, but the longer end of the curve is now rallying thanks to the expectation of the rate hike and the hope that it pushes back against inflation. it also doesn't hurt that oil prices turned a corner overnight.
Ugly Snowball Selling Thanks to Oil and Inflation Data
Ugly Snowball Selling Thanks to Oil and Inflation Data MBS lost nearly a full point by 4pm ET and 10yr yields were up 11.4bps at 4.95%. This is the highest since October 2023 when 10s briefly hit 5.006%.  At one point in the overnight session, yields were slightly LOWER on the day. Things changed in waves. First wave: oil prices surged overnight and had already broken $100 but the time PPI came out. Second wave: PPI was roughly in line with forecasts, but internal components suggested a 0.1 increase to core PCE inflation. The reaction was the sharpest of the day for bonds. Third wave: late day illiquid redistribution after 30yr bond auction (although this could also be incidental drift ahead of Friday's CPI data). If we could only focus on 2 things, it would be the acceleration in the fuel price trend and the unfriendly PCE implications in today's PPI data.  Econ Data / Events Core PPI m/m (Aug) 0.2% vs 0.3% f'cast, 0.2% prev Core PPI y/y (Aug) 4.6% vs 4.6% f'cast, 4.2% prev Jobless Claims (Sep)/05 206K vs 205K f'cast, 206K prev PPI m/m (Aug) 0.4% vs 0.4% f'cast, 0% prev PPI y/y (Aug) 5.4% vs 5.3% f'cast, 4.7% prev Market Movement Recap 09:39 AM Much weaker on a combo of oil and PPI reaction. MBS down 5/8ths and 10yr up 8bps at 4.92 01:09 PM MBS down 22 ticks (.69) and 10yr up 8bps at 4.92 03:39 PM MBS down just over 7/8ths of a point and 10yr up 11.6bps at 4.957
30yr Fixed Rates Jump to 7.07%
You may have seen other headlines today that reference 30yr fixed rates of 6.76%. Those stories would be citing Freddie Mac's weekly rate survey which is an average of the 5 business days (4 in this case, due to the holiday) ending yesterday (September 9th). Because of that methodology, the number lags reality. Today alone, the average lender moved up 0.125% in rate. In addition, Freddie no longer accounts for "points" (additional money paid upfront for a lower rate). In other words, 6.75% with one point is roughly the same rate as 7.00% with no points.  As a reminder, our daily rate index accounts for the impact of points so day to day comparisons are always apples to apples.  With all that in mind, today's average top-tier 30yr fixed rate is up to 7.07% from 6.97% yesterday and 6.89% the day before. This is a substantial 2-day change and the highest rate we've seen since May 21, 2025. While some people are erroneously talking about last night's news regarding $5k payments from the President, there are only two real factors that account for a vast majority of the upward movement. The first was yet another surge in fuel prices. The second was a poorly received Producer Price Index this morning (an inflation report that contributes to the even more important PCE inflation data due out at the end of the month). [thirtyyearmortgagerates]
Financing, Settlement, Processing Tools; Credit Score Tumult; Treasury Buybacks
Here in San Antonio, TX, interest rates are obviously part of mortgage event discussion. (On today’s The Big Picture Guild’s David Battany will be discussing rates and recent developments impacting them with Robbie C. and me.) Here’s what happens when you mix campaign promises, mortgage rates and the markets. Texas is a border state, obviously impacted by changes in immigration policy, especially when it comes to employment. Last Friday’s employment data showed strong job growth, but overall, a muddled picture. For example, the hiring rate is very low, and hiring is concentrated in restaurants, bars, and health care. The “worry” driving rates is on the inflation side. The U.S. Federal Reserve is likely on hold for the September meeting, given current data, and on hold in October given the meeting is a few days before the mid-term election. Our Mortgage Bankers Association recently moved its mortgage rate prediction higher and brought down 2026 volume and unit predictions and estimates that 2027 is expected to be close to this year’s production. Meanwhile, lenders are acting. Ryan Grant with NEO Home Loans, for example, wrote to say that the company created an assessment for mortgage professionals to take that helps them better understand the opportunity to take a new path in origination. “To date, we have had 500+ mortgage professionals take this assessment. Here is the quick 10-minute YouTube video that explains what we have created and why it’s so important.” (Today’s podcast can be found here. This week’s ‘casts are sponsored by NFTYDoor, the MLO's favorite HELOC platform. A broad buy box and hands-on mortgage expertise mean more loans close, faster, for banks, credit unions, and brokers. Clean files close in as little as zero days.
Sharply Weaker Again. Half Oil. Half PPI
It's been a rough couple of days for the bond market. Yesterday, it was Bessent and the reaction to the Treasury buyback announcement. Today it is an overnight surge in oil prices and a lackluster reaction to the Producer Price Index (PPI). PPI doesn't tend to move markets as much as CPI (due out tomorrow), but it certainly can for two reasons: on the rare occasions when it is released before CPI and when its components suggest an increase in PCE inflation. In other words, parts of the PPI data have a bearing on PCE and PCE is ultimately what matters most. The market doesn't always trade it that way because PPI/CPI reveal so much about PCE that PCE is less of a surprise by the time it comes out. About half of this morning's weakness was in place before PPI due to the overnight oil price spike. Bonds are showing their first indication that they might try to find their footing with 10yr yields around 4.92, but we're not counting chickens yet.