US DATA: Mortgage Purchase Applications Gaining Traction As Rates Dip
Jul-09 12:19
The MBA mortgage applications market composite index rose 9.4% W/W in the week of July 4 (2.7% prior), the biggest increase in a month to the highest level in 13 weeks (all on a seasonally-adjusted basis).
- Gains were more or less equally attributable to purchases (+9.4%) and refinancings (+9.2%). While refis hit a 12-week high, this was the highest purchases index since February 2023.
- As such it appears that there is some life returning to the mortgage market, though both purchases and refis are below levels seen both during the 2020-21 boom (indeed refis are currently 20% of those levels) and prior to the pandemic.
- The latest uptick appears to have been triggered by a pullback in mortgage rates, with 30Y conforming at a 13-week low 6.77% having fallen 16bp in the last month.
- Indeed the last time purchase applications were this high, 30Y conforming yields were 6.18%, with buyers taking advantage of what had fallen to what was at that time a 21-week low.
- Activity both then and now confirms sensitivity to mortgage rates, which at current levels continue to strain affordability.
- One additional note is that 30Y jumbos at 6.69% are trading inside regular rates by 8bp, the most since October 2023.
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FOREX: MUFG See Current USDJPY Levels Close to Peaking
Jun-09 12:18
- USDJPY was well supported Friday as markets focussed on the above-estimate headline change in NFP and the sizeable beat for average hourly earnings growth in the US. The Fed’s Harker subsequently said he sees steadiness in 'solid' latest job data.
- Fresh weekly highs for USDJPY ensued, with the pair rallying as high as 145.09 and essentially matching the initial target of the 50-day EMA. Broader dollar weakness to start this week briefly tipped the pair back below 144.00, however, the ongoing cautious optimism surrounding potential progress for US/China trade talks have seen the pair edge higher to 144.50 in most recent trade. 142.12, the May 27 low, remains the important support.
- Notably, MUFG see the current USDJPY levels post-NFP data as close to peaking with scope building for another sustained move back toward the 140.00-level. They see the BoJ as likely turning more hawkish if global financial market conditions remain more favourable after the notable improvement following the de-escalation of trade tensions.
- MUFG highlight the inflation backdrop is increasingly likely to prompt a hawkish shift in BOJ policy. They add the BoJ will also not want to see JPY depreciation given the risks of an FX move feeding further super-long JGB instability that in turn would lead to possible complaints by the US.
US SWAPS: J.P.Morgan Recommend 3.875% Feb 43/3% Feb 49 Swap Spd Curve Flattener
Jun-09 12:15
Late on Friday J.P.Morgan recommended initiating maturity-matched 3.875% Feb 2043/3% Feb 2049 swap spread curve flatteners (0.8/1 weighted)
- This is a micro RV play, as they noted that “the maturity-matched swap spreads between the 3.875% Feb 2043 and the 3% Feb 2049 issues are well (and positively) correlated but currently appear mispriced by about 2bp”.
STIR: Repo Reference Rates
Jun-09 12:10
- Secured Overnight Financing Rate (SOFR): 4.29% (+0.00), volume: $2.667T
- Broad General Collateral Rate (BGCR): 4.27% (+0.00), volume: $1.072T
- Tri-Party General Collateral Rate (TCR): 4.27% (+0.00), volume: $1.043T
- (rate, volume levels reflect prior session)
