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Today's much-anticipated jobs report ended up coming out much stronger than expected. A stronger result was all but guaranteed to cause carnage (relative) in the mortgage market and that's definitely what we're seeing. A caveat is that rates are still much lower than they were several months ago, but the average lender is now back in line with mid August levels. Additionally, this is one of the largest single day jumps we've seen with the average 30yr fixed rate moving from 6.26 to 6.53. A move of more than 0.25% in a single day is tremendously uncommon, but it can happen due to the underlying structure of the mortgage bond market. For those who would like to nerd out on those details, here you go: Whether a mortgage lender is lending their own stockpiles of cash or temporary cash obtained from a credit line, the chunk of cash wired to escrow at closing carries a cost. For a majority of mortgage lenders, the day to day changes in those costs are determined by the trading of mortgage-backed securities (MBS). MBS are similar to bonds like Treasuries in that investors pay a lump sum of cash and earn interest over time. They're different in several key ways. The most important difference is that the “borrower” of US Treasuries (i.e. the US Government) cannot return principal to the investor and end the deal. It must continue to pay for as long as it agreed. Mortgage borrowers, on the other hand, can sell/refi/etc and end the mortgage that underlies the mortgage-backed security. This introduces an element of uncertainty for investors that will be important in a moment.
Mortgage Rate Watch
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Today's much-anticipated jobs report ended up coming out much stronger than expected. A stronger result was all but guaranteed to cause carnage (relative) in the mortgage market and that's definitely what we're seeing. A caveat is that ra... (read more)
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MBS Commentary
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It is a very simple day for the bond market. There was a ton of anticipation for today's jobs report after the past two iterations raised concerns about flagging labor market conditions. Indeed, the Fed's decision to cut by 0.50 vs 0.25 l... (read more)
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Rob Chrisman
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As Maui grapples with rebuilding, and parts of the Southeast deal with continued rescue or recovery issues, where would our lives be without some levity? Rich Swerbinsky, Founder of Onward and Upward Consulting, has updated his “40 Greatest Names in ... (read more)
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