No Data, No Volatility Bonds were only open for half the day due to the national day of mourning for Jimmy Carter.  Overnight markets made for a slightly stronger start and those gains slowly eroded throughout the day.  MBS closed at perfectly unchanged levels and 10yr yields were a hair lower as Treasuries continue "healing" after this week's auction cycle.  Friday morning brings the jobs report, which is just as much of a potential volatility flash point as it always is. Market Movement Recap 10:25 AM Stronger overnight, with some slight backtracking.  MBS up 3 ticks (.09) and 10yr down 3.3bps at 4.669 12:24 PM weakest levels. MBS still up 2 ticks (.06) and 10yr still down 2.5bps at 4.676

Mortgage rates are driven by movement in the bond market and bonds were on a shortened schedule today due to the federal day of mourning for Jimmy Carter.  As such, volume and volatility were in short supply. Still, overnight market movement allowed the average lender to offer a microscopic improvement versus yesterday. Tomorrow (Friday, Jan 9th) is a different story.  The big jobs report comes out at 8:30am ET. Bonds routinely react to this report more than any other scheduled monthly data.  In other words, there is much higher potential for volatility tomorrow as that reaction plays out. As always, there is no way to know which direction things will move in response to economic data until we actually have the data in hand.  As always, it's not whether the data is higher or lower than last time, but rather, how it comes in compared to the median forecast. In this case, the median forecast for job creation is 160k, much lower than last month's 227k.  If jobs were to come in under 100k, rates would likely improve.  If the number is over 200k, rates would likely rise. The unemployment rate is also a consideration.  It's expected at 4.2%. Higher is better for rates, and vice versa.

“My buddy’s wife complains about constantly being sexually harassed at work. He told her she can stop working from home and go back to the office if she doesn’t like it.” “Home” means a lot, especially when it is lost. The nation is watching the loss of life and homes in LA county. Prior to the pandemic many LOs and AEs worked from home, but since then corporate types have kept an eye on the big banks and investment banks for WFH (work from home) versus return to the office clues. JPMorgan has had enough and is now going back to five days in the office. Citi, however, is still on a “three days in the office” schedule. Efficiency is good, but you lose the water cooler synergy and familiarity. People need a place to live, but not necessarily a place to work. In terms of homes, inventory for sale has been an issue for years, and will continue to be in many markets. It’s hard to increase housing units when they’re lost to fires, floods, and wind. A recent STRATMOR blog is “A Lender’s Personal Touch Can Help After a Disaster.” (Today’s podcast can be found here and this week’s is sponsored by CoreLogic. CoreLogic gives mortgage professionals the tools they need to establish long-term relationships with their clients, helping them keep future business in-house and transforming the way they do business. Today’s has an interview with homeowner and landlord Suzy Alvarez on how she chooses lenders, where the borrower experience can be improved, and what she wished she knew before buying her first home.)

Unless something incredibly interesting happens in the next 3 hours, this morning's commentary will likely be the end-of-day commentary as well.  Due to the national day of mourning, bonds will close early at 2pm ET, and there are no scheduled economic reports from government sources.  Traders are taking the half-day mentality seriously with 8am-9am volume less than half of yesterday's.  As hoped, there's been some gradual relief after the end of the week's auction cycle yesterday, but considering the price, it still hasn't been worth it.  In other words, yields are still higher than they were at the start of the week.  Friday's jobs report has the first right of refusal to prompt the next big move, for better or worse.

Some Volatility But Broadly Sideways Markets seemingly had a lot to get through today between economic data, the Treasury auction, and Fed Minutes.  In addition, there were several headlines from Fed speakers and other policy makers that could have inspired some movement.  Despite all that, and notwithstanding some back-and-forth volatility, bonds traded fairly flat.  Moreover, trading levels remain in line with those seen just after yesterday morning's sell-off.  Bonds are only open for a half day tomorrow and there are no major economic reports. The next big to-do is Friday morning's jobs report.  Econ Data / Events ADP Employment 122k vs 140k f'cast, 146k prev Jobless Claims 201k vs 218k f'cast, 211k prev Market Movement Recap 08:37 AM Moderately weaker overnight and mixed since data came out.  MBS unchanged and 10yr up 3bps at 4.713 12:54 PM MBS down 1 tick (.03) and 10yr up 0.8bps at 4.69 ahead of 30yr bond auction.   01:03 PM Gaining some ground after well-received 30yr bond auction.  10yr down 1bp at 4.673.  MBS back to unchanged. 03:26 PM Two-way volatility after the last update, but not much change.  MBS down 1 tick (.03) and 10yr down 0.4bps at 4.68

For the second day in a row, mortgage rates have moved higher at a modest to moderate pace. Unfortunately, that's been a trend so far in 2025 and it's compounded by the fact that rates were already close to their recent highs. The net effect is a move up to the highest levels since June for the average lender's top tier conventional 30yr fixed rate.  That rate has been over 7% more often than not since October 29th, and exclusively since December 19th.  Are rates "headed to 8 percent?" That's a figure that gets thrown around quite a bit in social media, etc., but there's only one average rate today, and it's 7.17%.  This means the prevailing top tier rate quote is fairly evenly split between 7.125 and 7.25 (because mortgage rates are typically offered in 0.125% increments). There's no way to know if rates are headed to 8 percent.  If they are, there's certainly no way to know today.  It would be just as plausible to claim that rates are headed to 6.5%.  Neither is more than a guess, educated or otherwise, and cases could be made for both. As has been and continues to be the case, economic data does the most to guide the path forward for rates.  Specifically, any heroic drop in rates would require downbeat data on the economy and inflation. We didn't have any of that today, so here we are.

I can’t take credit for, “People don’t care about how much you know until they know how much you care.” Empathy and maintaining contacts are oh so important for LOs, brokers, whoever is in contact with a client. Despite mortgage rates being the highest since July, refis now account for 41 percent of applications, and STRATMOR’s current blog is “Refis Help the Economy and the Industry is Ready to Help.” Meanwhile, lenders and vendors are keeping a close eye on Washington DC as well as the 50 state capitals. The MBA’s tools and resources for state associations, state legislative and regulatory committees, the Mortgage Action Alliance and MORPAC, advocacy and lobbying, and MBA state relations committees are all worth knowing about, at least, if you’re in this business. (Today’s podcast can be found here and this week’s is sponsored by CoreLogic. CoreLogic gives mortgage professionals the tools they need to establish long-term relationships with their clients, helping them keep future business in-house and transforming the way they do business. Today’s has an Interview with Onity Group’s Walter Mullen on the subservicing market as it pertains to technology, automation and data, consumer behavior, and what is possible with AI.) Lender and Broker Services, Software, and Products “Are you attending the servicing conference in Dallas next Month? Not much has changed with the traditional solutions offered in the servicing world. MortgageFlex is bringing innovation to loan servicing with a system inspired by decades of experience in the origination space. We have added full default to the industry’s first cloud-native servicing system. MortgageFlex Default is the first of its kind, built inside the full servicing system, and can also operate stand-alone. All other solutions are external products bolted on to support the default process. The application accommodates servicing of Loss Mitigation, Bankruptcy, and Foreclosure solutions. It is delivered with all 50 state foreclosure templates that the servicer can utilize and/or change themselves. Our SQL Database model includes real-time transactions, workflow queues, reporting, and free data access. Make an appointment with John McCrea or stop by booth 420 to see the future of loan servicing.”

Jobless claims data is normally a Thursday affair, but Federal economic data is not being released tomorrow due to the Jimmy Carter Day of Mourning (markets still open a half day).  As such, we received it this morning along with ADP Employment. Neither report caused any drama for rates, but neither prompted an obvious response. If there's a market mover so far this morning, it's a series of relatively friendly comments from Fed's Waller who downplayed tariff impacts on inflation and, despite acknowledging the uncertainty associated with new fiscal policies, said there are more rate cuts ahead.

Orderly Move to Highest Yields in 8 Months Bonds reacted logically to this morning's econ data at 10am.  ISM Services' inflation component was one of the worst offenders, but higher job openings didn't help.  The spike in yields was instantaneous but fairly well contained.  Bonds managed to drift sideways for the entire session after that with no discernible reaction to the 10yr Treasury auction (not a surprise considering it was very close to expected levels).  All told, yields inched up to the highest since April 2024, but in a very orderly way.  Econ Data / Events Job Openings 8.098m vs 7.7m f'cast, 7.839m f'cast ISM Services 54.1 vs 53.3 f'cast, 52.1 prev ISM Services Prices 64.4 vs 57.5 f'cast, 58.2 prev Market Movement Recap 10:17 AM Just slightly weaker overnight with additional selling after ISM data.  MBS down 6 ticks (.19) and 10yr up 4.6bps at 4.678 01:04 PM No major reaction to ho-hum Treasury auction.  10yr up 4.3bps at 4.676 and MBS down just over an eighth. 04:11 PM Sideways since 10am, essentially, with MBS down 6 ticks (.19) and 10yr up 5.9bps at 4.691

We came into the current week knowing that rates would take cues from any clear cues in this week's economic data.  In general, that means higher rates in response to stronger data or lower rates if the data is weaker.   Today's data was stronger across the board. One of the most closely watched economic reports that most people have never heard of--ISM's Service sector index--was only a bit higher than markets expected, but the report includes separate components for things like employment and prices.  Today's release showed a sharp increase in prices and that's a particularly sensitive subject for rates these days. At the same time, the US government released job openings numbers which showed an unexpected uptick back to the highest levels in 6 months.  Higher jobs openings tend to coincide with higher rates. Incidentally, mortgage rates also matched their highest levels in 6 months today, last seen on December 19th and July 1st. On the plus side, this didn't represent a huge move from yesterday's latest levels with the average lender only increasing 30yr fixed rates by 0.04%.