Bonds Scratch Out a Win Amid Dueling Headlines
Bonds remain surprisingly willing to react to the most seemingly insignificant war-related headlines. Today it was the much-debated geographical location of Pakistan's lead negotiator, Asim Munir, that set the tone. Bonds rallied on early accounts that he was en route to Tehran and pulled back when other headlines suggested he never left Pakistan. Ultimately, yields trickled just barely into positive territory by the end of the holiday-shortened session. Monday is fully closed for Memorial Day and we're back to watching the news feed on Tuesday.
Econ Data / Events
CB Leading Index MoM (Apr)
0.1% vs -0.2% f'cast, -0.6% prev
Consumer Sentiment (May)
44.8 vs 48.2 f'cast, 49.8 prev
Sentiment: 1y Inflation (May)
4.8% vs 4.5% f'cast, 4.7% prev
Sentiment: 5y Inflation (May)
3.9% vs 3.4% f'cast, 3.5% prev
U Mich conditions (May)
45.8 vs 47.9 f'cast, 52.5 prev
Market Movement Recap
08:41 AM Modestly stronger overnight with some additional gains after early peace talk headlines. MBS up an eighth and 10yr down 2.2bps at 4.547
10:09 AM MBS now up only 1 tick (.03) and down 7 ticks (.22) from the AM highs. 10yr up 0.4bps at 4.572 after briefly trading below 4.53.
12:48 PM After being down almost an eighth, MBS are back to being up 1 tick (.03) and 10yr yields back to unchanged after being about 1bp higher.
Mortgage lenders rely on the bond market to generate mortgage rates. In addition to being fully closed on Monday for Memorial Day, bonds also close 3 hours earlier than normal on the preceding Friday (i.e. today). The abbreviated trading session was fairly uneventful for rates despite some back-and-forth volatility in response to diplomacy headlines surrounding Iran/US peace negotiations. The flow of news resulted in better bond market levels early in the day and a pull-back in the late AM hours. After accounting for some lenders' mid-day rate changes, the average lender ended the day right in line with yesterday's levels which were also incidentally right in line with last Friday's levels.
Residential construction activity was mixed again in April, as building permits rebounded while housing starts pulled back modestly from March’s stronger pace. The latest Census Bureau data continues to reflect a construction sector navigating uneven demand and affordability pressures. Privately owned housing starts fell 2.8% to a seasonally adjusted annual rate of 1.465 million , down from March’s revised 1.507 million pace. Despite the monthly decline, starts were still 4.6% higher than April 2025 levels. Single-family starts dropped 9.0% to 930k, while multifamily starts (buildings with five units or more) increased to 529k. On the permitting side, activity recovered after March’s sharp decline. Total building permits rose 5.8% to an annual rate of 1.442 million , though that was still 0.2% below year-ago levels. Single-family permits declined 2.6% to 872k, while multifamily authorizations climbed to 514k. As is often the case with this data series, month-to-month swings can exaggerate the underlying trend. More broadly, residential construction activity has remained relatively stable over the past year, with builders continuing to balance elevated financing costs, affordability challenges, and uneven buyer demand. In fact, if we smooth the data with a simple 3-month moving average, it's easier to see a decent little rebound from the long term lows last Fall. In this light, housing starts are the strongest they've been since early 2024.
Mortgage applications pulled back last week as rising rates weighed on homebuyer demand, while refinance activity remained largely flat. The Mortgage Bankers Association (MBA) reported a 2.3% decrease in total application volume on a seasonally adjusted basis for the week ending May 15. The decline was driven primarily by softer purchase activity. The seasonally adjusted Purchase Index fell 4% from the prior week, though purchase demand remained 8% higher than the same week one year ago. Refinance activity was mostly unchanged despite the rise in rates. The Refinance Index dipped just 0.1% week over week but remained 35% above year-ago levels. The average 30-year fixed mortgage rate increased to 6.56% from 6.46%, reaching its highest level in seven weeks. According to MBA, concerns surrounding inflation, higher fuel costs, and growing worries over global public debt helped push Treasury yields — and mortgage rates — higher during the week. MBA’s Joel Kan said, " Overall applications were down to the lowest level in five weeks as purchase borrowers pulled back across conventional and government loan types. Refinance applications were essentially unchanged, with a decline in government refinances and an increase in conventional refinancing, likely as the increase in rates came late in the week. " Kan also noted that adjustable-rate mortgages gained traction as borrowers looked for lower-rate alternatives. ARM loans accounted for nearly 10% of total applications, the highest share since October 2025, with the average ARM rate sitting roughly 80 basis points below the 30-year fixed rate.
Builder confidence improved modestly in May, though sentiment remained subdued as elevated mortgage rates, affordability pressures, and broader economic uncertainty continued to weigh on the housing market. The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) increased three points to 37 . While the gain marks a slight rebound from April’s decline, the index is still sitting below the threshold that signals broader builder optimism. All three major components of the index moved higher in May. The gauge measuring current sales conditions rose three points to 40 , while the index tracking future sales expectations increased three points to 45 . The component measuring prospective buyer traffic also climbed three points to 25 , suggesting some buyers who had previously remained on the sidelines moved forward this spring. “The housing market remains soft as higher mortgage rates, rising gas prices and economic uncertainty related to the war in Iran continue to dampen buyer demand,” said NAHB Chairman Bill Owens. He added that ongoing efforts in Congress to modify the 21st Century ROAD to Housing Act could help increase housing supply and ease builder concerns. NAHB Chief Economist Robert Dietz said recent increases in long-term interest rates are likely to continue limiting buyer activity. He also noted that while some regional markets are showing relative strength, affordability challenges remain a significant obstacle for the broader housing market.
Wanna know the new buzz acronym? Residential Transition Loans (RTL): financing for properties in transition, including fix-and-flip, bridge, and rehab deals. Catch the wave… people always need to borrow money! Now, if only income guidelines by the Agencies matched how incomes have changed. Change is constant: “Rob, if you think inflation is bad, home insurance price increases in many parts of the nation are worse. When is the government going to address that?” I don’t know the answer to that: the government certainly is involved in lending, but not much so with insurance companies. Interestingly, insurance companies’ use of data analytics is way above that of the mortgage industry’s, although servicers and others are certainly catching up on risk-based pricing. (Today’s podcast can be found here and this week’s ‘casts are sponsored by TransUnion. Discover how data-driven mortgage intelligence is helping lenders identify in-market borrowers, strengthen portfolio performance, personalize outreach, retain customers, and drive smarter growth in an increasingly competitive housing market. Today’s has an interview with Insellerate’s Josh Friend on increasing loan officer and sales manager efficiency.) Lender and Broker Products, Software, and Services “Why are you paying onboarding fees to stay in a servicing relationship you don't love? Don't let onboarding and de-boarding fees keep you in a bad servicing relationship. At MSF Servicing, we believe partnerships should start with alignment, not invoices. That's why our onboarding fees are structured to the specific engagement. For initial transfers, we partner with you and help negotiate the de-boarding fees. We invest in the relationship first because we're confident about what we deliver next. Of course, we do so much more than collect payments. Our platform also supports full loan origination capabilities (FHA, VA, USDA, and conventional) paired with a disciplined retention strategy designed to maximize lifetime borrower value while reducing runoff, managing outcomes, anticipating risks, controlling narratives, and optimizing performance at every stage. Finally, our private-label and co-branding options allow your brand to stay front-and-center while our systems run seamlessly in the background. For more information, contact Rick Smith or call 860-989-9006.
Bonds are starting the session at the best levels of the week with modest overnight gains getting a small boost from news that Pakistan's army chief (a central figure in mediating US/Iran peace talks) is en route to Tehran. Trading ends at 2pm today instead of 5pm, as is usually the case for a Friday before a Monday federal holiday. Econ data is light, but additional war headlines could still move the needle.
Peace Deal Rumors Make For Mid-Day Reversal
Bonds started the day in fairly forgettable and slightly weaker fashion after overnight headlines suggested that the disposition of Iran's nuclear material remains a sticking point. Bonds were flat at weaker levels all morning. Then, just after 1pm, a different headline suggested a "draft agreement" was expected to be announced in a matter of hours. It listed several bullet points, but ironically, nuclear material was not on the list. Nonetheless, the bond market rallied into positive territory rather easily. As much of a head-scratcher as that is (why get excited if the nuclear sticking point remains?), there's no question about the reaction function with oil prices perfectly matching the bond yield move.
Econ Data / Events
Building Permits (Apr)
1.442M vs 1.39M f'cast, 1.363M prev
Continued Claims (May)/09
1,782K vs 1790K f'cast, 1782K prev
Housing starts number mm (Apr)
1.465M vs 1.41M f'cast, 1.502M prev
Jobless Claims (May)/16
209K vs 210K f'cast, 211K prev
Philly Fed Business Index (May)
-0.4 vs 18 f'cast, 26.7 prev
Philly Fed Prices Paid (May)
47.90 vs -- f'cast, 59.30 prev
Market Movement Recap
08:31 AM Weaker overnight as Iran says it's keeping nuclear material. MBS down a quarter point and 10yr up 3.2bps at 4.62
12:26 PM Fairly flat at modestly weaker levels. MBS down 3 ticks (.09) and 10yr up 1bp at 4.598
01:17 PM Rallying on Iran peace agreement rumors. MBS up 3 ticks (.09) and 10yr down 1.4bps at 4.575
02:29 PM Rally continues on peace deal news. MBS up more than a quarter point and 10yr down 3.2bps at 4.556
02:59 PM most recent newswires pushing back on previous, optimistic news. 10yr back near unchanged levels at 4.585 and MBS up an eighth (after being up more than a quarter point a short while ago.
After posting a decent recovery from 9-month highs yesterday, it looked like mortgage rates were destined to bounce back toward slightly higher levels today. In fact, when lenders released their initial rates this morning, the average 30yr fixed rate was indeed moderately higher. But shortly after 1pm ET, news broke regarding additional progress in the Iran war peace process. Much like many similar headlines of late, this one could easily unravel in the coming hours, but the bond market responded positively enough to erase the day's losses. In general, when bonds are gaining, rates move lower. Today's intraday gains allowed lenders to "re-price" to lower rates. The average lender was just slightly lower than yesterday's latest levels as of 3pm ET. On the plus side, lower is lower, and that's a victory for today. On the other hand, rates are still very close to long-term highs in the bigger picture. Additionally, and to reiterate a point above, we've seen these sorts of news stories come and go with markets ultimately erasing the initial move after the next set of headlines push the narrative back in the other direction. Bottom line: this was a decent intraday gift, but we're not viewing it as a definitive pivot point in rate trends.
Lots of folks were leaving the MBA’s National Secondary yesterday, and many comments and questions were heard. “Did you hear that Jerry Seinfeld is doing a show at the MBA National in October?” (True) “Ginnie Mae began ratcheting up its cybersecurity efforts in 2024. Why aren’t others?” (Good question; I’m sure they are at some level.) “Most lenders are selling loans to the Agencies through their ‘cash windows’ on a whole loan basis rather than through MBS execution.” (True; Freddie and Fannie have increased gfees, so when capital markets staff are seeking every basis point in price, they are nudged toward the window.) During the day, FICO announced that the next generation UltraFICO Score, a “brand new scoring model that combines the trusted FICO Score with real-time, consumer-permissioned cash flow data built through a partnership between FICO and Plaid, is available for lender use… it examines how money actually moves through a consumer's everyday accounts, including cash inflows and outflows, account balance stability, and spending behavior.” (Today’s podcast can be found here and this week’s ‘casts are sponsored by TransUnion. Discover how data-driven mortgage intelligence is helping lenders identify in-market borrowers, strengthen portfolio performance, personalize outreach, retain customers, and drive smarter growth in an increasingly competitive housing market. Today’s has an interview with TransUnion’s Satyan Merchant on the accelerating shift toward mortgage credit score competition, exploring how lenders should adapt to increasing model choice, evolving credit report innovation, operational complexity, alternative data, and the growing role of dynamic credit insights across the full mortgage lifecycle.)
