WTMS Blog Today = What’s up in Mortgage Today (AM) – 09/17/2024

Mortgage-backed securities are experiencing a notable shift today as 5.0 coupon UMBS continue their dominant performance over the previously favored 5.5 coupons. This transition reflects the market’s adaptation to changing interest rate expectations and Fed policy positioning. The 10-year Treasury yield remains relatively stable at 4.04%, down slightly from yesterday’s 4.05% close. Bond traders are closely monitoring Federal Reserve communications for signals about future rate decisions. The mortgage market is seeing improved conditions with 30-year fixed rates averaging 6.61%, down from 6.73% a week ago according to Curinos data. This decline in rates is providing some relief to potential homebuyers who have been sidelined by higher borrowing costs throughout 2024. GNMA securities are following similar patterns to UMBS, with institutional investors rotating into lower coupon positions. The mortgage origination business continues to face volume challenges despite the modest rate improvements.

Capital markets are responding to mixed economic signals, with inflation data and employment numbers creating uncertainty about the Fed’s next moves. Rob Chrisman’s latest analysis suggests mortgage professionals should prepare for continued volatility through the remainder of September. Barry Habib and MBS Highway teams are highlighting the ongoing impact of regulatory changes, including discussions around the Homebuyers Privacy Protection Act and trigger lead restrictions. Real estate professionals are cautiously optimistic about the recent rate decline, though transaction volumes remain below historical norms.

The shift in UMBS coupon performance indicates sophisticated institutional positioning ahead of potential Fed policy changes. Market participants are particularly focused on how mortgage rates will respond to upcoming economic releases and Fed commentary.

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