Not Quite The Rally You'd Expect, But a Rally Nonetheless
Today's vitals might be a bit confusing at first glance. Payrolls came in at -23k versus forecasts of 80k. At most moments in history, that would be worth a substantial rally. Today it was only worth 3bps in the 10yr and a quarter point in MBS. To be fair, it was worth even less without a late day drop in oil prices for unrelated reasons. But at this moment in history, low payroll counts are far more common and they're doing far less to influence the unemployment rate (case in point, today's FELL to 4.1% from 4.2%). This went a long way toward offsetting the drop in payrolls. Nonetheless, payrolls remain very important to traders even if economists have shifted more of their focus to other metrics.
Econ Data / Events
Average earnings mm (Jul)
0.1% vs 0.3% f'cast, 0.3% prev
Non Farm Payrolls (Jul)
-23K vs 80K f'cast, 57K prev
Participation Rate (Jul)
61.4% vs -- f'cast, 61.5% prev
Unemployment rate mm (Jul)
4.1% vs 4.2% f'cast, 4.2% prev
Market Movement Recap
09:06 AM sharply stronger after jobs data but off the very best levels. MBS up 10 ticks (.31) and 10yr down 5.3bps at 4.625
11:20 AM MBS up 7 ticks now (.22) and 10yr down 2.5bps at 4.652 (well off the lows of 4.603)
02:38 PM Very flat. MBS still up 7 ticks (.22) and 10yr down 2bps at 4.658
Mortgage rates dropped moderately today after the latest jobs report showed much lower jobs created than expected. The monthly jobs report is one of the most--if not THE most--important pieces of economic data to the rate market on any given month. If the numbers are close to forecasts, there isn't always a big reaction. Today's numbers were quite far from forecasts for some parts of the report, but slightly offset by others. The net effect was a decent improvement in the underlying bond market. Because mortgage rates are based on bonds, rates dropped accordingly. The average top-tier 30yr fixed rate moved down from 6.77 to 6.74--the lowest since July 20th.
Mortgage application activity declined for a second consecutive week as higher borrowing costs continued to weigh on both purchase and refinance demand. The Mortgage Bankers Association (MBA) reported a 2.9% decrease in total application volume on a seasonally adjusted basis for the week ending July 31. Purchase applications decreased 4% from the previous week on a seasonally adjusted basis and were 3% lower than the same week one year ago. Elevated mortgage rates continue to challenge affordability, dampening buyer demand despite improved housing inventory in some markets. Refinance activity also softened, with the Refinance Index falling 2% from the prior week and remaining 9% below year-ago levels. As rates moved higher, fewer homeowners had an incentive to refinance. "In the wake of the July FOMC meeting, longer-term rates increased, pushing the 30-year fixed mortgage rate to 6.81 percent, its highest level in more than a year,” said Mike Fratantoni, MBA’s SVP and Chief Economist. Next week's data will likely bounce back higher given that rates have dropped noticeably so far in August. Per MND's daily rate tracking, 30yr fixed rates hit 2 week lows on Wednesday and moved even lower on Friday. Mortgage Rate Summary:
30yr Fixed: 6.81% (from 6.76%) | Points: 0.65 (from 0.69)
15yr Fixed: 6.13% (from 6.15%) | Points: 0.73 (from 0.84)
Jumbo 30yr: 6.72% (from 6.70%) | Points: 0.52 (unchanged)
FHA: 6.43% (from 6.41%) | Points: 0.75 (from 0.88)
5/1 ARM: 6.03% (from 5.98%) | Points: 0.99 (from 1.23)
As many of us prepare to head to So Cal for the California MBA’s Western Secondary (800 or so registered), artificial intelligence continues to be the buzz. I recently received this question: “Rob, does it seem to you that we’re now at the same inflection point with AI as when everyone was afraid that DU & LP were going to replace all the underwriters?” Could be, and of course we still have underwriters. Meanwhile, borrowers still need help, and rates don’t show signs of going down. I received a question about “off the beaten path” routes for assistance. The Mortgage Credit Certificate Program might help. “The MCC program is a homebuyer assistance program designed to help lower-income families afford homeownership. The program allows homebuyers to claim a dollar-for-dollar tax credit for a portion of mortgage interest paid per year, up to $2,000. The remaining mortgage interest paid may still be calculated as an itemized deduction.” (Today’s podcast can be found here. This week’s ‘casts are sponsored by Figure. Figure is shaking up the lending world with their five-day HELOC, offering borrower approvals in as little as five minutes and funding in five days. Figure has hundreds of partners in the Banking, Credit Union, Home Improvement, and of course, IMB space embedding their technology. Today’s has an interview with Wilqo’s Tiffany Jacobelli on building scalable teams, processes, and operational frameworks that can handle mortgage volume surges without sacrificing quality, compliance, or borrower experience.)
Nonfarm payrolls (NFP) FELL 23k versus an 80k forecast. Last month was revised down as well. From a traditional market-watching perspective, this is pure rally fuel. Indeed, bonds are rallying sharply so far. Let's hope it sticks. Why wouldn't it? As labor force dynamics have shifted, it doesn't take much job growth (or perhaps any?) to keep the unemployment rate steady. In fact, unemployment dropped in today's report, though it should be noted it's offset by a lower labor force participation rate (meaning unemployment basically held steady). We've seen some shifts in trading patterns after jobs reports in the past year, so don't assume this rally completely sticks (it could, and that would be great, but it's not as much of a given as it would have been if these numbers came out in 2024).
Almost Like Clockwork
Almost like clockwork, after several days spent mostly rallying on a headline-driven drop in oil prices, bonds reversed course as the tone of the headlines changed and oil prices bounced. That said, oil didn't bounce too much today. The rest of the drama for bonds came courtesy of a big corporate bond announcement before the open. Yields remain safely under supportive ceilings for now, but weekend-adjacent days have been prime candidates for war headline volatility. And as always, the jobs report can never be ruled out as a source of inspiration for better or worse.
Econ Data / Events
Jobless claims
199k vs 202k f'cast, 198k prev
Market Movement Recap
09:18 AM Moderately weaker overnight on a combo of oil and corporate bond issuance. MBS down 5 ticks (.16) and 10yr up 2.4bps at 4.637
11:46 AM MBS Down 7 ticks (.22) and 10yr up 4.5bps at 4.658
12:23 PM MBS now down 10 ticks (.31) and 10yr up 5.9bps at 4.673
02:20 PM Sideways at weakest levels. MBS down 9 ticks (.28) and 10yr up 5.9bps at 4.672
Mortgage rates rose modestly on Thursday, with multiple lenders making mid-day adjustments in response to bond market volatility. Bonds remain highly attuned to war-related developments and the impact on oil prices which, in turn, have a bearing on inflation implications. Higher inflation begets higher interest rates, all else equal. In addition to the oil/inflation narrative, bonds also came under some pressure as Alphabet announced a large corporate bond offering. Like anything in the market, bond prices change in response to supply and demand. If a big corporate bond competes for investor demand, it can indirectly lower the demand for the bonds that underlie mortgage rates. When bond prices fall, rates rise. The good news is that the adjustment is very small in the bigger picture. Additionally, yesterday's rates were the best in more than 2 weeks. In other words, today's rates are modestly higher than the 2-week lows. There's potential for volatility tomorrow, for better or worse, in response to the monthly jobs report. And of course, war-related headlines create ongoing risk/opportunity for movement in either direction.
It's as good of a day as any to revisit our primer on corporate debt issuance given that it's having an impact on bonds today. Alphabet announced a $25bln bond offering around 7:45am ET, and yields instantly moved 2bps higher. Before that, there was nearly 2bps of weakness as bonds followed oil prices modestly higher. Since the start of the domestic session, things have been calm. Econ data was a non-event. Both MBS and Treasuries are holding near yesterday's weakest levels (not a huge deal considering the narrow range). Lastly, this could simply be viewed as a quick, token pull-back ahead of jobs report Friday.
Lender and Broker Software, Products, and Services What if the most important capital markets decision you're making today is based on incomplete data? Mortgage lenders don't struggle with a lack of information. They struggle with too much of it spread across too many systems. Pricing in one place. Hedge performance in another. Pipeline metrics somewhere else. By the time you've connected the dots, the market has already moved. That's why Optimal Blue created Profitability Center, a unified capital markets dashboard that brings production metrics, profitability insights, market intelligence, pipeline activity, investor ratesheets, and platform updates into a single personalized view. No more hunting. No more switching screens. No more waiting for reports. Just the insights that matter, surfaced the moment you log in. Whether you're managing margins, monitoring lock activity, or overseeing production performance, Profitability Center helps you move faster and act with confidence. See what a truly connected capital markets experience looks like. Heading to the HousingWire AI Summit on August 11? JazzX AI will be there and we should connect. If you're interested in how lenders are moving beyond disconnected AI point solutions toward enterprise intelligence, let's grab lunch, connect between sessions, or meet at happy hour. We’d love to compare notes and learn what your team is focused on. Email marketing@jazzx.ai with a meeting time.
Bonds Shake Off Mid-Day Weakness to Hold Mostly Steady
Bonds took a break from their recent trend of moderate day over day movement to hold relatively steady on Wednesday. Econ data didn't get in the way in any noticeable way. If anything, ISM data briefly helped bonds move away from the day's weaker levels. But the key underlying consideration was a stable, sideways performance in fuel prices. MBS and Treasuries were technically a hair weaker, but it's just as fair to say they were "unchanged." Familiar risks remain in the day's ahead depending on Iran war headlines and Friday's NFP.
Econ Data / Events
ADP Employment
44k vs 70k f'cast, 95k prev
ISM Biz Activity (Jul)
59.1 vs -- f'cast, 55.4 prev
ISM N-Mfg PMI (Jul)
54.1 vs 54.5 f'cast, 54.0 prev
ISM Services Employment (Jul)
47.4 vs -- f'cast, 51.2 prev
ISM Services New Orders (Jul)
57.2 vs -- f'cast, 55.1 prev
ISM Services Prices (Jul)
70.3 vs -- f'cast, 67.7 prev
Market Movement Recap
07:53 AM Bonds set to open fairly flat after initial overnight gains and a modest pull-back. 10yr down half a bp at 4.611
10:02 AM No major reaction to ISM data, but some weakness in advance. MBS down an eighth and 10yr up 1.3bps at 4.628
11:58 AM MBS down 2 ticks (.06) and 10yr up 3.7 bps 4.267
03:07 PM Off weakest levels and holding sideways. MBS roughly unchanged and 10yr up half a bp at 4.619
