Stocks are lower as oil rises. Bonds and MBS are down.
President Trump wrapped up his visit with China yesterday. China wants “strategic” stability – “‘Strategic stability’ from strategic rivalry is a major shift,” said Henry Wang, founder and president of the Beijing-based Center for China and Globalization. “We are moving to a new normal. This summit was an inflection point after a tough relationship that began with the start of Trump.”
The public statements on Iran were sparse, but since China gets a lot of oil from Iran the situation had to weigh heavily in the background. China is looking for rhetorical shifts in the US’s stance against Taiwan.
Retail sales rose 0.5% last month, which was in line with expectations. Auto sales were a drag. Excluding vehicles, retail sales rose 0.7%. Sales overall were up 4.9% on a YOY basis. Census doesn’t adjust these numbers for inflation, so retail sales were up modestly on a real basis.
Stephen Miran has resigned from the Federal Reserve Board as Kevin Warsh takes over. Miran has been a consistent dovish voice, advocating for much lower rates.
The bidding war for Two Harbors continues, as United Wholesale launched a $12.50 cash tender offer for TWO. The Two Harbors Board rejects the offer, and advises shareholders to accept the Cross Country Mortgage offer. Cross Country has sort of sweetened the terms of its offer, giving TWO shareholders a prorated dividend in the quarter the deal closes, upping the consideration to $12.45 – $12.68. TWO is currently trading around $12.60 per share.
Mortgage delinquencies increased in the first quarter, according to the MBA. DQ rates rose to 4.44%, which was up 40 bps compared to a year ago. Much of this was driven by FHA loans.
“Mortgage delinquencies increased on an annual basis, with conventional loan delinquencies relatively flat but with notable increases among FHA and VA loans,” said Marina Walsh, CMB, MBA’s Vice President of Industry Analysis. “Last quarter, the delinquency rate for FHA loans was about 900 basis points higher than the conventional delinquency rate, and the VA delinquency rate was almost 225 basis points higher than the conventional delinquency rate. These are the widest spreads since 2021.”
Added Walsh, “We also saw movement of some delinquent FHA and VA loans into later stages of delinquency and into foreclosure. While the overall foreclosure rate remains well below historical averages, the first quarter’s foreclosure inventory rate for FHA loans reached its highest level since the fourth quarter of 2018, and the foreclosure rate for VA loans reached the highest level since the second quarter of 2017.”
MCT made its first AI TBA trade. “When we demonstrated the Hedge Recommendation Agent at MBA Secondary last year, we said AI execution was coming,” said Phil Rasori, COO at MCT. “The Trade Execution Agent is that reality. What we’ve built is a system that understands a pipeline, determines what action is warranted, and can complete that action responsibly. This is what MCT’s AI arc has always been building toward: making mortgage secondary marketers dramatically more efficient and their operations more competitive.”
