Bonds staged a sharp rally this morning on a day that should have gone the other way. The Bureau of Labor Statistics reported final demand producer prices up 1.3% in September and 6.3% over the past 12 months, with energy driving more than 80% of the monthly jump (the final demand energy index rose 10.8%). Prices less foods, energy and trade services rose 0.5%. Even so, the 10-year Treasury traded near 5.05% this morning, down from a 5.19% close on Wednesday. Mortgage News Daily ties the move to a selloff in AI stocks that sent money into Treasuries, and cautions that it could reverse just as quickly if that worry fades.
The rally lands one day after September CPI came in at 3.7%, a print Scotsman Guide said puts an October hike in play, and one day after Fannie Mae's Economic and Strategic Research group rewrote its outlook. Scotsman Guide reports the October forecast now has the 30-year averaging 7.5% through the end of 2027, up from 6.7% in the prior month's forecast, with 2027 originations cut to $1.86 trillion from $2.28 trillion and 2027 refinance volume down more than 46% to $430 billion. Census retail sales rose 0.8% in September. One strong bond session is pushing against a forecast built on sticky inflation, and the next few prints decide which one holds.
On rates: Bankrate's 30-year fixed sits at 7.50% this morning, against 7.47% the prior day and 7.00% a month ago, so rates have moved up about half a point over the past month and sit near the top of their 90-day range of 6.61% to 7.57%. Mortgage News Daily's 5/1 ARM average is at 6.85%, and National Mortgage News reports non-QM loans made up over 23% of September rate locks. Survey averages are morning snapshots, so a midday bond move like today's is a reason to ask your secondary desk for a fresh reprice rather than quote the morning number. On the calendar: housing starts and permits are expected October 16 to 18, jobless claims on October 22, the core PCE window opens October 23, and the FOMC meets October 27 to 28 with no dot plot at that meeting.
Industry and regulatory notes: HUD issued a mortgagee letter, effective immediately, that makes Build to Rent communities of single-family homes, duplexes and triplexes eligible for FHA multifamily insurance under Sections 221(d)(4) and 223(f); it does not change single-family borrower rules. The Mortgage Bankers Association released an affordability roadmap on October 14 that, per National Mortgage Professional, calls for cheaper credit reports for borrowers above 700, lower FHA insurance premiums and fewer refinance hurdles; these are proposals, not policy. HousingWire reports Bank of America's home loan volume fell 12% in the third quarter, with JPMorgan and Wells Fargo also reporting lower mortgage volume. And Realtor.com puts the September median asking rent at $1,694, down 0.4% from a year ago, its 38th straight annual decline.
call every borrower you have floating before noon, get a fresh reprice from your secondary desk on the morning's bond rally, and walk each one through locking now versus carrying the float into the October 28 Fed decision.