Don't Believe This Week's Mortgage Rate News. Here's Why

Posted To: Mortgage Rate Watch

Another week, another glut of news articles claiming mortgage rates are at all-time lows. While no one is intentionally trying to deceive you, the news is deceptive nonetheless. Why? Freddie Mac’s weekly mortgage rate survey is at the heart of the issue. The survey is a mainstay of the mortgage industry and the news media. It’s been around for decades and is really the only mortgage rate benchmark the industry has. Despite the apparent street cred, their numbers can be hopelessly inaccurate at times. There are two reasons for the inaccuracy. The first is the survey’s methodology. Freddie publishes the survey on Thursday but sends out the questionnaire on Monday. While they accept responses through the middle of the day on Wednesday, most respondents reply when they receive the survey (on Monday…(read more)

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Don't Believe This Week's Mortgage Rate News. Here's Why
Don't Believe This Week's Mortgage Rate News. Here's Why

MBS RECAP: Have MBS Finally Reached The Limits of Outperformance vs Treasuries?

Posted To: MBS Commentary

Have MBS Finally Reached The Limits of Outperformance vs Treasuries? Bonds are in the throws of an extended negative momentum move that's been in place throughout October. At times, stimulus-related headlines have accounted for volatility during this move. MBS have been outperforming decisively during this time. That makes it easier for lenders to avoid raising rates nearly as quickly as the broader bond market suggests. But spreads are now at all-time "tights" (maximum MBS outperformance) thus increasing the risk that negative momentum in Treasuries will increasingly translate to MBS. Econ Data / Events 20min of Fed 30yr UMBS Buying 10am, 1130am (M-F) and 1pm (T-Th) Markit PMI Composite 55.5 vs 54.3 prev Markit Manufacturing PMI 53.3 vs 53.4 f'cast Markit Services PMI 56…(read more)

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MBS RECAP: Have MBS Finally Reached The Limits of Outperformance vs Treasuries?
MBS RECAP: Have MBS Finally Reached The Limits of Outperformance vs Treasuries?

MBS Day Ahead: When Will Luck Run Out For MBS vs Broader Bond Market?

Posted To: MBS Commentary

In the bond market, as a whole, we've never seen yields any lower for any longer than they've been in 2020. The runners up aren't even close. Even though bonds have become increasingly commoditzed (think "buy to sell" as opposed to "buy and hold"), the buy and hold crowd still exists, and it still has an impact on trading levels. The relationship between Treasuries and MBS makes that clear. Simply put, MBS offer higher yields compared to Treasuries, but with effectively zero default risk (federally back-stopped Fannie/Freddie protect the investor from borrower default). Investors only need to worry about risks relating to how long any given MBS will last. If rates fall too quickly, MBS coupons can pay off too quickly as the underlying mortgages are refinanced…(read more)

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MBS Day Ahead: When Will Luck Run Out For MBS vs Broader Bond Market?
MBS Day Ahead: When Will Luck Run Out For MBS vs Broader Bond Market?

Today is October 22nd, 2020, and Mortgage Rates Are Not at All-Time Lows

Posted To: Mortgage Rate Watch

Thursdays are special days for mortgage rate aficionados–or they can be anyway. That’s when the weekly mortgage rate survey from Freddie Mac is released. The survey is a mainstay of the mortgage industry and the news media. It’s been around the longest and is really the only mortgage rate benchmark the industry has. That’s TERRIFYING considering how hopelessly inaccurate it can be at times. In Freddie’s defense, they are upfront about their methodology, which is the biggest part of the problem . They send the survey out on Monday and then accept responses until Wednesday. Based on my research comparing actual rates with Freddie’s survey over the years, a vast majority of the responses come in on Monday and Tuesday. As such, this weekly rate survey is better described as a “Monday mortgage…(read more)

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Today is October 22nd, 2020, and Mortgage Rates Are Not at All-Time Lows
Today is October 22nd, 2020, and Mortgage Rates Are Not at All-Time Lows

MBS RECAP: Staggering MBS Outperformance Easing Negative Momentum Pain

Posted To: MBS Commentary

Staggering MBS Outperformance Easing Negative Momentum Pain Bonds are in the throws of an extended negative momentum move that's been in place throughout October. At times, stimulus-related headlines have accounted for volatility during this move. Today was one of the handful of weaker days for Treasuries, yet MBS are down only 1 tick heading into the end of the day. They've been doing this a lot lately, and it makes it even easier for lenders to avoid raising rates nearly as quickly as the broader bond market suggests. Econ Data / Events 20min of Fed 30yr UMBS Buying 10am, 1130am (M-F) and 1pm (T-Th) Jobless Claims 787k vs 860k f'cast, 842k prev Existing Home Sales 6.54m vs 6.3m f'cast, 5.98m prev Market Movement Recap 08:30 AM Bonds opened slightly stronger in Asia and remained…(read more)

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MBS RECAP: Staggering MBS Outperformance Easing Negative Momentum Pain
MBS RECAP: Staggering MBS Outperformance Easing Negative Momentum Pain

MBS Day Ahead: What's The Next Ceiling For Bond Yields?

Posted To: MBS Commentary

There are several ways to look at "the range" when it comes to post-covid trading levels in the bond market. There are several ways to look at "the bond market" for that matter, but as usual, we'll focus on 10yr yields even though this is an MBS site ( here's why ). In the bigger picture, yields are still in a very low, very narrow range with historically light volatility. Up until the end of September, we could even say that shorter time horizons were also boasting exceptionally low, narrow ranges. 0.62 – 0.72 was a prime example, and it was intact for nearly 2 months starting in early August. Over the past 3 weeks, however, yields have clearly been on a mission to move toward higher levels. After .72, it was a very easy call to name 0.79 the next ceiling on the…(read more)

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MBS Day Ahead: What's The Next Ceiling For Bond Yields?
MBS Day Ahead: What's The Next Ceiling For Bond Yields?

MBS RECAP: Bonds Find Footing Early, But Aren't Able to Go Green

Posted To: MBS Commentary

Bonds Find Footing Early, But Aren't Able to Go Green It's safe to say the bond market found its footing today, but that is only a reference to TODAY (not necessarily "finding footing" in the bigger picture). In terms of 10yr yields, overnight highs gave way to slightly lower highs in the morning and another small improvement in the afternoon. None of that was enough for bonds to turn positive on the day, but of the potential "bad days" we could have had, this is one of the better ones. Econ Data / Events 20min of Fed 30yr UMBS Buying 10am, 1130am (M-F) and 1pm (T-Th) Market Movement Recap 08:50 AM Big selling overnight (i.e. higher yields), both out of the gate and in 2 other individual bursts (10:12pm and 12:26am ET). That brought yields up to .836%, but they've…(read more)

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MBS RECAP: Bonds Find Footing Early, But Aren't Able to Go Green
MBS RECAP: Bonds Find Footing Early, But Aren't Able to Go Green

MBS Day Ahead: It's Gentle, But It Hurts

Posted To: MBS Commentary

There have been reasons to fear a momentum shift in bonds for several weeks now. Here's how we discussed it at the beginning of October: "It's never a bad idea to consider risks on the road ahead–especially when things start deteriorating at the beginning of the month. We often see a shift in momentum with a new month when the previous one was fairly consistent with a certain theme. September's theme was definitely consistent." We went on to discuss a small scale breakout of a consolidation pattern that occurred well inside the already super narrow .62-.72 range. At the time, we concluded that things would be getting more serious when the .72 ceiling gave way. 4 days later, it did. The entirety of the 10/5 – 10/9 week was spent bouncing at the 0.79% technical ceiling…(read more)

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MBS Day Ahead: It's Gentle, But It Hurts
MBS Day Ahead: It's Gentle, But It Hurts

Mortgage Rates Moving Higher

Posted To: Mortgage Rate Watch

It began last week. It was subtle–so subtle as to pass largely unnoticed. But the gentle drift toward slightly higher rates has taken bigger steps so far this week. As of this afternoon, the average lender is quoting the highest rates since late September! That’s quite a realization when juxtaposed with last week’s (misleading) headlines about “all-time lows.” If the highest rates in nearly a month sound scary, don’t freak out just yet. During that time, rates have held inside one of their narrowest ranges ever. By the time we consider how low rates are in the bigger picture there’s actually never been a comparable example of “this low for this long.” The lift-off hasn’t proven to be too alarming just yet either. Many lenders are still quoting the same note rates today versus their recent…(read more)

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Mortgage Rates Moving Higher
Mortgage Rates Moving Higher

MBS RECAP: Bearish Bond Trend Continues

Posted To: MBS Commentary

Bearish Bond Trend Continues Looking back at MBS or Treasuries over the past few weeks reveals a clear termination of a rally trend at the end of September and a similarly well-established bearish trend throughout October. Treasury yields are the highest since early June and MBS aren't too far away from their weakest levels in months. Stimulus prospects continue applying pressure, but we should also consider the same discussion we had at the end of September. Simply put, sometimes momentum just runs the other direction with the start of a new month–especially if the previous month was moving almost exclusively in the other direction. Econ Data / Events 20min of Fed 30yr UMBS Buying 10am, 1130am (M-F) and 1pm (T-Th) Housing Starts 1.415m vs 1.457m f'cast, 1.388m prev Building Permits…(read more)

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MBS RECAP: Bearish Bond Trend Continues
MBS RECAP: Bearish Bond Trend Continues