WTMS Blog Today = What’s up in Mortgage Today (AM) – 10/07/2025

Bond markets started Monday sluggish but found buyers as 10-year yields approached the 4.20% technical ceiling overnight. Markets recovered into positive territory by the CME open at 8:20 AM. Early gains erased overnight weakness as bonds moved higher following soft consumer employment expectations data from the NY Fed Survey.

The government shutdown continues to delay key economic reports including September’s jobs data, leaving markets in a holding pattern. Investors are increasingly pricing in a 96% chance of a 25-basis point Fed rate cut by month-end. Without major data releases, traders are parsing lower-tier economic indicators for directional clues.

ISM Services data disappointed across multiple metrics this morning. Business Activity fell to 49.9 versus 51.8 forecast, while the broader Services PMI dropped to 50.0 from 52.0 previously. Services Employment remained weak at 47.2, though new orders stabilized at 50.4.

Large servicers are aggressively pursuing recapture strategies to retain control over borrower relationships from origination through servicing. Both GSEs are steering correspondent sellers toward excess strip executions even on familiar note rate windows. This trend is bleeding into more generic note rate pricing, particularly affecting excess interest-only securities.

UMBS 30-year performance shows stronger demand for lower coupons expected to benefit from slower prepayment speeds. The 5.0% coupon trades at 99.41, up 9 basis points from yesterday’s close. Higher coupons like the 6.0% remain flat as refinancing risks persist in current rate environments.

Locking vs Floating

Risk-reward considerations remain muted during the government shutdown period. The modest rally to lowest rates in over two weeks presents compelling lock opportunities for conservative clients. Risk-tolerant borrowers may wait for delayed jobs report data, provided bonds don’t lose significant ground before then.

Today’s Events

– ISM Business Activity (Sep): 49.9 vs 51.8 forecast, 55 previous
– ISM Non-Manufacturing PMI (Sep): 50.0 vs 51.7 forecast, 52.0 previous
– 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 |
| 6.0 | 102.16 | -0.01 |
| 5.5 | 100.76 | -0.06 |
| 6.0 | 101.65 | -0.06 |

GNMA 30 yr
| Coupon | Price | Intra-Day Change |

Treasuries
| Term | Yield | Price | Intra-Day Yield Change |
| 2 yr | 3.572 | 99.851 | -0.015 |
| 5 yr | 3.707 | 99.613 | -0.025 |
| 10 yr | 4.128 | 101.001 | -0.020 |
| 30 yr | 4.727 | 100.381 | -0.022 |