UMBS are down 27 bps again today.  We had a good day yesterday, and now giving it back.   This is why we can’t have nice things.
Bonds were initially sideways in the overnight session, but began drifting higher in yield as the domestic session approached.  Slightly stronger data in Germany didn’t help.

But the most noticeable selling arrive at the 8:20am CME open with an obvious uptick in volume and weakness.

US equity-index futures slipped after Microsoft Corp. and Google’s parent Alphabet Inc. delivered a mixed picture of big tech earnings, setting the stage for peers still reporting this week.

Contracts on the Nasdaq 100 sank 0.4% and those on the S&P 500 were down 0.3%.

Rate sheets this morning waving goodbye to yesterday’s gains, as mortgage bonds start out underwater and the 10yr Treasury yield starts reaching for 5% again. Reprice risk on the day is moderate, mortgage bonds are already deep in trouble and we shouldn’t see them get worse, yet it wouldn’t be the first time that bad went to worse.

So is the worst behind us? Have we finally seen the peak in rates? It’s still too early to tell, although there is some hope that the 5% level for the 10yr will prove to be the final line in the sand. If that happens, mortgage bonds will also find a floor that would help rates stop rising.

New Home sales rose to 759k vs 680k estimate (676k prev).  Up 12% MoM and 34% YoY.
Building Permits = -4.5% vs -4.4% estimate

Median price fell 12% YoY to $418,000

Goldman released its 2024 housing outlook yesterday, which says that 2024 will look a lot like 2023, with mortgage rates stuck between 7% and 8%. They see home price appreciation more or less stagnating – rising only 1.3% for the year. They see housing starts falling next year, weighed down by a huge backlog of multi-family properties under construction with poor absorption rates.

Bonds had a somewhat encouraging rally over the past 3 business days, but all that went out the window today.  Why?  No particular reason!  That’s the nature of a market consolidation that falls hard on the heels of a rapid move to levels not seen in 16 years.  As gloomy as it may sound, the best way to view today is as the more normal of the past 4 days with the previous 3 rally days requiring explanations that included profit taking, short covering, value buying, etc. (all things that aren’t immediately measurable, but that make decent sense based on logic and precedent).  Bottom line: last week’s Retail Sales and Fed speakers pushed yields to 5% and not much has happened since then.  More things will start happening tomorrow, and even more next week.

The Department of Justice (DOJ) is considering filing an antitrust suit against the National Association of Realtors (NAR) centered on NAR’s Participation Rule and the Clear Cooperation Policy, which governs broker commission agreements.

“Whether it is another DOJ lawsuit or a civil lawsuit, it is clear that decoupling broker commissions is a likely outcome, especially in light of NAR’s recent policy change permitting listing brokers to not compensate buyer brokers. Last week, it was reported that the Real Estate Board of New York will prohibit listing brokers from paying buyer brokers beginning January 1, 2024. The end result of decoupling broker commissions is likely higher upfront costs for homebuyers. It is also expected to reduce the number of licensed real estate agents in the U.S. If first-time homebuyers are affected and there are less real estate agents, then it could result in fewer annual home sales.

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