Please Pretend that you are an editor for a financial website like CNBC.com , seekingalpha.com, Barry Habib, Motley Fool.com, MBShighway.com , or MBSlive.com. Write a brief, 10 sentence, and engaging summary, no longer than 10 sentences or a 60 second read, in paragraph style with no bullet points. Total summary should be no more than 10 sentences. This should be no more than a 60 second read for someone with a college freshman reading level. Please give the summary the title of “WTMS Blog Today = What’s up in Mortgage Today – <today’s date in mm/dd/yy format> > > > >”
Next in a separate section, please find the 5 best hashtags that would be best for Instagram, Linkedin, Twitter, and especially YouTube. In order to do that, we need the hashtags to be comma-separated. So please always put a “,” between each hashtag. So when you write the hashtags please put a comma between each, and one at the end.
Then At the end, please write a specific, engaging, SEO-optimized Youtube headline that starts “Mortgage Today <today’s date in mm/dd/yy format, Use today’s ACTUAL date in Chicago in the format MM/DD/YY>” and highlights specific info from the passage. Use specific info from the original material to make the headline specific:
Wednesday – August 7, 2024
As we turn to looking at the 5.5 coupon on the UMBS, they open the day up 3 bps. At least it’s green.
The Bank of Japan hiked interest rates on July 31, which triggered a violent sell-off in the Nikkei 225 stock market index. Overnight the BOJ walked back talk of further rate hikes while markets are “unstable.” Japanese stocks liked the message, and that pushed stocks higher. Bonds are selling off as the “flight to safety” trade unwinds.
Since 1955, the Fed has unwound 86%, on average, of the prior rate hikes during the ensuing rate easing cycle, which we’re entering. This means the Fed funds rate bottoms out at 0.75%. The smallest historical reversal would suggest that Fed funds hits 2.25%. Yet the market is now expecting a Fed funds rate trough of 3.25%. This means there is probably way more easing to come than we expect.
10yr auction = 3.96 vs 3.93 expectations
bid to cover = 2.32x vs 2.49x prev
Bonds had been drifting into weaker territory for most of the day although there was a modest rally in the hour leading up to the auction.
Very little transpired during Wednesday’s trading session to change the outlook in the morning commentary. With the volatility associated with Monday’s market shock out of the way, this week increasingly looks like the kind of token bond market correction/consolidation that frequently plays out on a relatively data-free week that follows a strong rally and that precedes a significant event (i.e. next week’s CPI). This correction might have been more obvious at the start of the week had it not been for the global market shock associated with the Yen carry trade unwind. As of today, it’s progressed far enough that we can begin to ask if we’ve seen enough for things to calm down.
UMBS closed the day down 4 bps at 100.43
United Wholesale reported second quarter earnings. Origination volume rose 5.6% YOY to $33.6 billion. Gain on sale margin rose to 106 basis points compared to 88 basis points a year ago. The company has been unloading its MSR portfolio, particularly the higher coupon MSRs. Given the more aggressive forecast for Fed rate cutting, MSR valuations will probably take a hit.