Oil prices continue to move higher, now trading just under $96/barrel and at the highest level since early June. The consistent rise in oil is a reflection of continued escalations between the US and Iran. The US destroyed five Iranian oil tankers near Kharg Island yesterday, with the total now at 10 since the beginning of the month. The rise in oil prices is applying some pressure to the Bond market, which is slightly lower to start the day.
US Treasury Secretary Scott Bessent challenged traders to bet against his campaign to support the yen, saying that he is the house. Bessent is trying to instill confidence in the yen because if it gets too low, Japan will be forced to sell US Treasuries to come up with funds to support it, which would negatively impact our longer-term rates.
Bessent is expected to announce the Treasury’s buyback total later this morning. Last time we heard from him, he said that the Treasury would at least double the $2 billion per operation amount, meaning at least $4 billion. But now there is an expectation that it could be more, with Morgan Stanley estimating a $10 billion per operation cap. The announcement could help yields to move lower and also set the groundwork for a strong 10-year Auction, which will take place at 1:00pm ET.
ADP Weekly Employment Data
ADP reported that on average, there were 12,000 jobs created per week over the previous four weeks. While this is a slight increase from the previous week, which showed a 10,000 average, today’s report puts the job pace at roughly 50,000 jobs for the month, which is weak.
ADP’s report is more evidence that the extremely strong BLS Jobs Report may be the outlier, as all other labor market data sources are pointing to weaker figures.
Mortgage Applications
The MBA released its mortgage application data for last week, showing that rates rose to 6.85%, which is the highest level since June 2025. Rates last week were 36bp higher than the same time last year.
Purchase volume was flat despite the rise in rates, and is up 4% year over year. Refinances fell 6% and are now down 25% from last year.
Refinances made up 41% of transactions, with most being cash out. Make sure you are utilizing the debt consolidation tool or you may be missing a lot of the business out there.
MBS Highway Housing Index
The MBS Highway National Housing Index fell 5 points in September to 22, its fourth consecutive monthly decline. The index is also 5 points below its level a year ago. For context, readings above 50 indicate expansion, while readings below 50 signal contraction. The latest reading shows that housing market activity remains firmly in contraction territory.
Buyer activity fell 6 points from August to 21 and was well below its reading of 29 a year ago, when mortgage rates were lower. Just 9% of respondents nationwide described buyer activity as active, continuing a steady decline in recent months. The trend suggests that buyers remain highly sensitive to changes in mortgage rates.
The price direction index also declined for the fourth consecutive month, falling 4 points to 23. With the index well below 50, price reductions continue to outpace price increases in markets across the country.
Technical Analysis
Mortgage Bonds are trying to remain above support at 101.02, which is a very important level, as the next floor is 24bp lower.
The 10-year once again tested 4.81% this morning, which is holding. A break above this level would likely cause yields to test 4.84%.
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