WTMS Blog Today = What’s up in Mortgage Today (AM) – 10/06/2025

Mortgage bond markets opened Monday under global pressure despite a quiet domestic economic calendar. The 30-year UMBS 5.0 coupon dropped 13 basis points as overnight selling hit mortgage-backed securities harder than treasuries. Political developments in Japan sparked concerns about increased debt supply, creating volatility that spilled over into U.S.

secondary markets. The Treasury curve is bear steepening this morning, with 10-year yields climbing 4.2 basis points to 4.16% while the 30-year jumped even higher. This curve movement typically signals inflation concerns or supply worries, both bearish for mortgage pricing.

When longer-term rates rise faster than short-term rates, it directly pressures the mortgage coupons that originators depend on for competitive pricing. Banking Sector Consolidation Accelerates

Fifth Third announced it will acquire Comerica for $10.9 billion in stock, creating the ninth-largest U.S. bank with $288 billion in assets.

The deal represents the largest bank merger announced in 2025 and could signal the start of broader regional bank consolidation. For mortgage originators, this consolidation trend could reduce warehouse lending options while potentially creating stronger, more stable correspondent investors. Independent mortgage banks should pay close attention to how this merger affects warehouse credit availability.

The combined entity will have enhanced lending capacity but may also tighten underwriting standards during the integration period. Originators who rely on these institutions for warehouse facilities should diversify their funding sources now before more consolidation occurs. Trump Calls on GSEs for Housing Supply

President Trump made headlines by calling on Fannie Mae and Freddie Mac to pressure homebuilders into increasing construction on their 2 million empty lots.

In a Truth Social post, he compared builders to OPEC’s past market manipulation and urged the GSEs to “get Big Homebuilders going” to restore the American Dream. However, it remains unclear how the GSEs could create meaningful incentives for builders, given their role is purchasing loans rather than financing construction. This political pressure highlights the ongoing housing supply shortage that keeps mortgage demand constrained.

While GSEs cannot directly finance construction, they could potentially adjust their loan purchase criteria to favor developments that increase housing stock. Any policy changes from the GSEs typically affect mortgage pricing and eligibility standards within 30-60 days of announcement. Government Shutdown Impacts Continue

The federal government shutdown continues to create operational headaches for mortgage originators as USDA loans remain on hold and FHA services operate with skeleton crews.

Fannie Mae and Freddie Mac continue normal operations, but FEMA cannot issue new flood insurance policies, forcing borrowers toward private alternatives. These disruptions are creating delays in loan closings and forcing lenders to adjust their pipelines accordingly.

Locking vs Floating

Current market conditions favor locking for risk-averse clients, especially with deals closing within 15 days.

The overnight selling pressure and government shutdown uncertainty create a volatile environment where rates could move sharply in either direction. Risk-tolerant borrowers may want to wait for the delayed jobs report, but only if bonds don’t lose significant ground before then.

Today’s Events

– ISM Business Activity (Sep): 49.9 vs 51.8 forecast
– ISM Non-Manufacturing PMI (Sep): 50.0 vs 51.7 forecast
– ISM Services Employment (Sep): 47.2 vs 46.5 previous
– ISM Services New Orders (Sep): 50.4 vs 56.0 previous
– ISM Services Prices (Sep): 69.4 vs 69.2 previous

Bond Pricing

UMBS 30 yr
| Coupon | Price | Intra-Day Change |
| 5.0 | 99.37 | -0.07 |
| 5.5 | 100.94 | -0.03 |
| 6.0 | 102.19 | -0.01 |

GNMA 30 yr
| Coupon | Price | Intra-Day Change |
| 5.0 | 99.59 | -0.06 |
| 5.5 | 100.78 | 0.02 |
| 6.0 | 101.68 | -0.07 |

Treasuries
| Term | Yield | Price | Intra-Day Yield Change |
| 2 yr | 3.594 | 99.821 | 0.019 |
| 3 yr | 3.612 | 99.332 | 0.02 |
| 5 yr | 3.738 | 99.489 | 0.024 |
| 7 yr | 3.934 | 99.64 | 0.032 |
| 10 yr | 4.154 | 100.783 | 0.035 |
| 30 yr | 4.753 | 99.959 | 0.044 |