Mortgage News Daily

War headlines struck back in the overnight session. Specifically, Iran struck back against various U.S. and allied sites, allegedly in response to U.S. strikes on Iranian sites. Peace prospects take an obvious hit in response to these escalations and financial markets remain willing to react accordingly. Oil prices were already moving up to the highest levels in more than a week in the overnight session and that momentum peaked at 6am ET. Treasury yields followed and then stayed broadly sideways for the duration of the domestic session. In the bigger picture, 10s are well within the 4.43-4.51 range that dominated last week. War headline sensitivity continues accounting for 90% of forward-looking volatility risk while econ data rounds out the rest.

The following newswire hit about an hour before the open: TRUMP: US IN THE MIDDLE OF FINAL NEGOTIATIONS TO END IRAN WAR. Bond yields and oil prices had already fallen modestly up to that point, but more than doubled the overnight rally after that. Yields are thus starting the day roughly 4bps lower, perfectly erasing the entirety of Wednesday's losses. Jobless Claims had no impact at 8:30am ET. An hour earlier, Challenger Layoffs possibly moved the needle microscopically, but it's just as likely that the ongoing drop in oil prices did the trick. There's no other big ticket data for the day, so we're headline watching and waiting for Friday's jobs report.

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After hitting long-term highs on May 19th, mortgage rates dropped somewhat quickly by May 26th. Ever since then, they've been moving back and forth in a very narrow range. Today's movement happened to be the good kind with the average lender cutting top-tier 30yr fixed rates by 0.03%. As always, keep in mind that mortgages are most commonly offered in 0.125% increments. When our daily rate index changes by only 0.03%, it's because we are also measuring the underlying costs associated with any given rate and extrapolating the relative impact on interest rates. To use a crude example, let's consider two different hypothetical rate quote options yesterday and today. Yesterday 6.625% at a cost of $12 upfront 6.50% at a cost of $24 upfront Today 6.625% at a cost of $9 upfront 6.50% at a cost of $21 upfront Now pretend you only have $15 to spend for closing costs. You still can't afford to buy your rate down to 6.5%, and you'll still be choosing the 6.625% quote. But while the interest rate portion of your quote didn't change, the actual interest cost improved. Our index captures and expresses these improvements in a single number.

Slippage is a bit less severe than leakage. Neither of them will turn a green day red, but they both erode morning gains. Today's gains primarily followed a pre-market comment from Trump who said the US was in the middle of final negotiations to end the Iran war. Bonds hit their best levels shortly thereafter and then the slippage set in. The backtracking was more evident in Treasuries with the 10yr losing almost half of the day-over-day gains. MBS managed to hold firmer, and were still broadly in line with the middle of the AM range by 4pm. Friday brings the jobs report. While it hasn't been as big of a flashpoint recently, we'd never rule out a reaction in the event of a big beat/miss.

Buzz has been growing around the labor market for the past several months, but today's jobs report went the extra mile to make it official. The job market is officially re-accelerating. Actually, the better claim would be that the jobs market is simply attempting to level off after a very long post-covid normalization. Most of today's charts show that quite well.

Today we’re going to learn about the facts of life. Trivia-loving basketball facts’ fans know that this is the first time the NY Knicks have led in the finals since the night of OJ’s White Bronco car chase. Homeowner’s insurance has become the “you can’t avoid it and you can’t afford it” fact of life for some homeowners in some areas. Rate is selling yoga pants. The increase in credit union’s mortgage activities is a fact and unmistakable, and you can bet CUs will continue to press their “resi” lending advantages. Lastly, and it’s a fact that people in our biz enjoy following money around, every time someone in Europe taps a card at a cafe in Lyon or a pharmacy in Munich, the transaction data leaves the continent. The data flows through servers in the United States, is processed by Visa or Mastercard, and then goes back to Europe. The money moves but the data stays somewhere in America. We’re talking about $24 trillion in annual transaction volume through those two networks. Card payments represent 56 percent of all cashless transactions in the EU. Virtually none of it runs on European infrastructure! (Today’s podcast can be found here and this week’s ‘casts are sponsored by Experian and the Experian Verify Hub. The platform brings manual submissions in-house and consolidates post-submission activities into a single environment, aiming to provide more streamlined access, faster insights, and a more cohesive user experience. Today’s has an interview with MeridianLink's Larry Katz on how to simplify the complexity behind lending while empowering financial institutions to focus on what matters most: the people and communities they serve.)

Mortgage applications eased again last week even as borrowing costs moved lower, suggesting that modest rate relief was not enough to bring borrowers back in force. The Mortgage Bankers Association (MBA) reported a 2.5% decrease in total application volume on a seasonally adjusted basis for the week ending May 29. The decline was led by refinance activity, which slipped 2% from the previous week. Refinance demand remained 20% higher than the same period one year ago, however, underscoring that activity is still running above 2025’s pace even as it softens week to week. Purchase demand also pulled back, though the move was more modest. The seasonally adjusted Purchase Index fell 3% week over week and was still 7% above year-ago levels. The average 30-year fixed mortgage rate decreased to 6.57% from 6.65%, but the drop was not enough to spark a meaningful pickup in demand. MBA’s Joel Kan said easing energy prices tied to developments in the Middle East helped push rates slightly lower, though “the retreat in rates... did not lead to an increase in mortgage applications.” Kan added that purchase applications were still ahead of last year’s pace, but were at their slowest weekly level since April, while refinance activity was at its weakest since last June. He also noted that the 30-year fixed rate eased to 6.57%, while the 5-year ARM rate edged higher, reflecting a flattening yield curve.

Over the past three months, mortgage rate movement has been driven primarily by developments in the Iran war. It's not that war, itself, is a consideration, but rather the implications for fuel prices and inflation. Bonds care deeply about inflation and interest rates are based directly on bonds.

If you had to find something reassuring to say about the bond market today, it would be that there wasn't much selling after 9am ET. Unfortunately, there was a whole lot of selling in the prior 30 minutes. Try as they might, analysts couldn't find any obvious holes in the strong picture painted by the jobs report. Stocks got completely destroyed as well--evidence of the jump in Fed rate hike expectations adding to a tech correction that was already underway. An Iran war peace deal remains the biggest market moving prospect on the horizon, but traders will be a bit more interested in labor market data going forward.