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Over the last two years, many banks' earnings have been plagued by a combination of elevated deposit costs and muted loan demand.Those headaches are poised to subside — but perhaps not right away — following the Federal Reserve's decision last month to lower its benchmark interest rate. The 50 basis-point reduction was the first cut since the onset of the pandemic in March 2020.Heading into the sector's third-quarter earnings season, which begins Friday, all eyes will be on deposit costs, loan growth and, relatedly, net interest income, which is the difference between what banks collect on loans and what they pay for deposits.JPMorgan Chase, Wells Fargo and Bank of New York Mellon will be first to deliver their results, followed next week by Citigroup, Bank of America, Goldman Sachs and other large and regional banks.While analysts expect net interest income to improve eventually as a result of the Fed's pivot to rate cuts, they also anticipate that banks will report near-term pressure in that area. As rates start to come down, there will likely be a gap between the timing of when loans and deposits reprice, they argue."We think companies are very enthusiastic about the ability to reduce deposit costs and that they will do so very aggressively," Scott Siefers, an analyst at Piper Sandler, said in an interview. But "the fear" is that banks "might have to take a step back" before they are able to "take a step forward," he noted."Overall, [net interest income] maybe takes a little hit before it starts to get better," Siefers said.Three other topics will also be on investors' minds this earnings season, according to analysts. Credit quality metrics, the capital markets business and the information that banks share about their fourth-quarter outlooks will be heavily monitored, they said.Here's a closer look at five areas to watch as the latest earnings season kicks into gear.

Adobe Stock Images Wall Street banks are expected to launch a barrage of bond sales as soon as next week, capitalizing on ultra-low credit spreads and strong demand from investors after they report quarterly results.The six biggest U.S. banks could borrow $20 billion to $24 billion after they post results starting Friday, JPMorgan Chase & Co. credit analyst Kabir Caprihan wrote in a research note. That's more than the $15 billion they typically raised in October over the prior decade, according to Caprihan, and comes on top of the roughly $107 billion they have borrowed this year at their senior holding company level, according to data compiled by Bloomberg.Although the banks are borrowing more this year, they are really getting back to a normal level of bond issuance since the Federal Reserve stopped raising interest rates last year and more recently began cutting them."It is reasonable to expect bank new issuance post-earnings and preelection," said Nicholas Elfner, co-head of research at Breckinridge Capital Advisors. "With tight spreads and the prospect for Fed cuts, we think supply should normalize in the quarters ahead."Big banks always need fresh funds for their own lending and as the biggest borrowers in the U.S. investment-grade market, they are known to be savvy about when to borrow.Bloomberg Intelligence analyst Arnold Kakuda said the banks are getting ahead of potential volatility around the U.S. elections in November and taking advantage of borrowing costs that are near a 20-year low amid strong investor demand. He estimates the "Big Six" will complete at least $15 billion of sales."The lenders may be strategic and issue above these levels to quench the voracious thirst of bond investors for corporate debt," Kakuda said.Banks typically issue debt after reporting quarterly results, which kick off on Friday morning with JPMorgan and Wells Fargo. Next week, Bank of America, Citigroup and Goldman Sachs are scheduled to report on Tuesday, followed by Morgan Stanley on Wednesday.Moody's Ratings expects the big banks to report strong third-quarter trading revenue and improvements in investment banking compared with the year-ago period — thanks in part to record corporate debt issuance and an increase in equity issuance.All eyes will be glued to forecasts for full-year net interest income, which measures the difference between what a bank collects on loans and pays out to depositors. It is the biggest revenue source for traditional lenders, so any hints of what they can deliver in 2025 as the Fed is expected to keep cutting rates will be important.The broader banking industry faces some credit concerns, especially smaller lenders with commercial real estate exposure. The proportion of banks with negative ratings outlooks has risen, with several negative actions last year after a string of regional-bank failures, according to S&P Global Ratings.Still, most banks enjoy stable outlooks and regulatory tightening since the regional crisis has been a credit positive, S&P analysts including Stuart Plesser wrote in a note.In addition to bank bond issuance expected this month, JPMorgan's Caprihan predicts $30 billion to $40 billion of new bank debt to hit the market from November through January. Voya Investment Management will be one of the investors looking to buy, according to Samuel Wilson, portfolio manager at the firm.He views banks as a rare bright spot in a market where corporate bond spreads are so tight that investors must scour for opportunities where the risks are worth the slim rewards. U.S. investment-grade spreads averaged 82 basis points as of Wednesday's close, according to Bloomberg index data, the tightest level since September 2021."In the context of a tight market, it's still a trade that we like," Wilson said in a phone interview Wednesday.

The stronger-than-expected jobs report played havoc with mortgage rates this week, driving them to their highest level since the start of September, Freddie Mac said.The 20 basis point weekly gain was the largest since April, Sam Khater, Freddie Mac chief economist, said in a press release."However, we should remember that the rise in rates is largely due to shifts in expectations and not the underlying economy, which has been strong for most of the year," Khater continued. "Although higher rates make affordability more challenging, it shows the economic strength that should continue to support the recovery of the housing market."The 30-year fixed rate mortgage averaged 6.32% for Oct. 10, up from 6.12% one week prior, Freddie Mac's Primary Mortgage Market Survey reported. But it was still 125 basis points lower than the 7.57% it was at for the same week last year.At the same time, the 15-year FRM gained 16 basis points, rising to 5.41% from 5.25% as of Oct. 3. For this time last year, it was at 6.89%.Zillow's rate tracker showed the 30-year FRM increased 19 basis points as of 11 a.m. Thursday morning, to 6.19% from last week's average of 6%.Compared with the previous day, the rate was 4 basis points higher, with the morning's Consumer Price Index report likely being a factor.Meanwhile, the 10-year Treasury yield continued to rise as well. It broke back above 4% at the start of the week and was at 4.1% at 11 a.m. on Thursday, up 25 basis points from its close seven days prior."Mortgage rates rebounded this week on stronger than anticipated employment and wage growth data," said Orphe Divounguy, senior economist at Zillow Home Loans in a Wednesday night statement. "Last week's strong jobs report caused yields and the mortgage rates that shadow them to rebound sharply."Even before the CPI report showing inflation running hotter than expected, Divounguy said whether any further rate cuts by the Federal Open Market Committee were coming is not clear, noting Chairman Jay Powell said any future action would be dependent on incoming economic data."Traders are now putting the probability of a 50 basis point rate cut at the next FOMC meeting at 0%, down from 32% before the jobs report," Divounguy said. "More stubborn core inflation would likely prevent further declines in long dated yields and mortgage rates."More volatility in mortgage rates is likely as traders parse economic data as it comes in, Divounguy said.Despite the uncertain environment, the Mortgage Bankers Association expects rates to fluctuate between 6% and 6.5% for the next several months, Bob Broeksmit, president and CEO said in a Thursday morning comment on the Weekly Application Survey.So another reduction in Fed Funds Rate at the next FOMC meeting remains likely."A higher-than-expected headline and core CPI print likely reduces the chances of a Fed rate cut in November, though a 25-basis point cut remains the baseline expectation," Sam Williamson, First American Financial senior economist said in a  statement. "Friday's [Producer Price Index] release will offer further clarity."The latest Wolters Kluwer Blue Chip Economics Indicators survey, also conducted before the CPI report came out, raised the consensus expectations for FOMC rate cuts this year to total 94 basis points, up from 76 basis points one month prior.While all participants expect a 25 basis point cut to be the next move out of the Fed, 98% think that will happen at the November meeting. The remaining 2% believe the FOMC will hold off until December.

Borrowers and lenders had an easier time this summer dodging foreclosures and are taking longer to complete them.In the third quarter, 87,108 properties, or 1 in every 1,618 housing units nationwide, had a filing according to Attom's latest Foreclosure Market Report. That was down 2% quarterly and 13% lower from the same period last year. Within that finding, bank repossessions between July and September also fell 12% annually. The 8,795 REO transactions in the third quarter however represented a 1% quarterly increase. Attom CEO Rob Barber in a press release said the company anticipates foreclosure levels to stay "relatively low," outside of areas facing unique pressures such as affordability challenges."While we are seeing a decrease in foreclosure starts and repossessions, it's crucial to remain vigilant, as any economic disruptions or changes in interest rates could shift the current trend," he said.  Homeowners in recent years have seen their equity skyrocket, but have also seen expenses such as homeowners insurance and property taxes rise sizably. Distressed mortgages remain muted as many borrowers are clinging to ultra-low rates, and servicers and federal housing agencies have improved their loss mitigation efforts following the pandemic. During the recent quarter, 62,380 properties started the foreclosure process, down 10% from a year ago. That decline is more pronounced in monthly figures, as the 29,668 starts in September were a 19% decline from September 2023. Foreclosures meanwhile are averaging over two years to complete across the country. It takes 815 days on average for a foreclosure to be completed, a timeline that's been rising since last summer, up 6% year-over-year. It still takes over 10 years on average to complete a foreclosure in Louisiana, Attom found. That's by far the slowest in the nation, and at 3,520 days three years longer than the average foreclosure in Hawaii (7 years). The process can still be relatively swift. Foreclosures in New Hampshire close in under 6 months at 165 days on average, and four more states see the transactions close within around 8 months. Many states by Attom's measure have seen their foreclosure rates drop by double digits both quarterly and annually. Counting states with 1,000 or more foreclosure starts in the third quarter, North Carolina recorded the largest annual decline with starts down 44%. Illinois is particularly struck with foreclosures, and its 3,231 starts this summer only trailed New York. It also had the highest rate in the country, with one in every of its 904 housing units having a foreclosure filing.

Underlying U.S. inflation rose more than forecast in September, representing a pause in the recent progress toward moderating price pressures.The so-called core consumer price index — which excludes food and energy costs — increased 0.3% from August and 3.3% from a year ago, Bureau of Labor Statistics figures showed Thursday. The three-month annualized rate advanced 3.1%, the most since May, according to Bloomberg calculations.Economists see the core gauge as a better indicator of underlying inflation than the overall CPI. That measure rose 0.2% from the prior month and 2.4% from a year before, still the slowest annual rate since early 2021 and largely due to cheaper energy prices.The BLS said shelter and food combined accounted for over 75% of the overall monthly advance. Goods prices rose as well after reliably falling over the past year. The higher-than-expected inflation figures, along with last week's blowout U.S. jobs report, will likely amplify the debate whether the Federal Reserve will opt for a small interest-rate cut next month or pause after a large September reduction. Officials penciled in another half-point of cuts by year-end, and many have said they're watching developments in the labor market.Stock futures and Treasury yields declined, while the dollar weakened. Traders see higher odds of a 25-basis-point Fed rate cut next month.The Fed started lowering borrowing costs in September with an outsize 50-basis-point reduction given what had been continued inflation progress as well as a string of weak labor-market data. Minutes of the meeting released Wednesday indicate there was a robust debate over the size of the cut, and officials who have spoken since then say they favor a gradual approach.Category BreakdownNew and used car prices were up as well as apparel and furniture, contributing to only the second increase in so-called core goods prices since June 2023. Within services, car insurance, medical care and airfares rose notably. Admission to sporting events climbed a record 10.9%, in part reflecting the start of football season.Shelter prices, the largest category within services, increased 0.2%, a big step down from August's 0.5% advance. Owners' equivalent rent — a subset of shelter and the biggest individual component of the CPI — rose 0.3%, also a deceleration from the prior month. Hotel prices declined, widely defying expectations for a hefty increase.Excluding housing and energy, service prices rose 0.4%, the most since April, according to Bloomberg calculations. It also represented the third straight acceleration, the longest streak since early 2023. While central bankers have stressed the importance of looking at such a metric when assessing the nation's inflation trajectory, they compute it based on a separate index.That measure — known as the personal consumption expenditures price index — doesn't put as much weight on shelter as the CPI does, partly why it's trending closer to the Fed's 2% target.The PCE measure, which will be released later this month, draws from the CPI as well as certain categories within the producer price index, which is due Friday. Several of the CPI items that registered robust gains, like car insurance and airfares, won't feed through to the PCE, which should support another muted advance when the data are released later this month.Separate data Thursday showed that applications for unemployment benefits rose last week to the highest in over a year, reflecting large increases in Michigan, as well as states affected by Hurricane Helene.

(Bloomberg) -- The deal had all the hallmarks of Wall Street's inevitable power shift: Apollo Global Management Inc., king of the rising non-bank lenders, seizing on weakness at Credit Suisse Group AG to snatch up one of the Swiss firm's most lucrative businesses.But Atlas SP Partners — the structured finance business that's key to Apollo Chief Executive Officer Marc Rowan's plan to become a lending machine — has struggled under its new owner since last year's acquisition, according to interviews with almost a dozen people with knowledge of the unit. Cultures have clashed, business has slowed and a raft of senior departures culminated in the abrupt exit of Atlas SP's longtime head, Jay Kim, in August.The unit also came up against higher interest rates that curtailed mortgage originations. Other aspects of the business proved harder outside of a bank. Atlas no longer had a major trading desk making markets in the securities it structured, and it didn't benefit from banks' low funding costs to compete in the most vanilla assets.Apollo, Blackstone Inc., KKR & Co. and other private equity powerhouses have been ramping up their private lending businesses in recent years, riding the $1.7 trillion boom as banks have pulled back. Rowan aims to increase annual origination volume by almost 70% over the next five years, and the firm already earned more management fees from credit last year than KKR, Blackstone and Carlyle Group Inc.But the past 18 months have shown that Apollo's march deeper into banks' traditional territory won't be as simple as it appears on paper. Crucially, Atlas needs a new leader to move past a tumultuous year-and-a-half and reach Rowan's goal of $275 billion of annual originations by 2029.Rowan isn't backing away from Atlas, one of the biggest of Apollo's 16 origination platforms. The unit has lined up fresh firepower in the form of $5 billion of financing from BNP Paribas SA and $5 billion of equity from investors including Massachusetts Mutual Life Insurance Co. and Abu Dhabi Investment Authority.The firm finally secured a broker-dealer license and has begun plans to build a trading operation, with the hope that more deals will come its way if it can show there's a market for investors to sell the assets if needed.The unit started out with about $40 billion of assets under management when Apollo acquired it. After assets fell, Atlas moved into new areas to get back to roughly $40 billion again, some of the people said."With $50 billion of originations, $5 billion of long-term equity and a team that's nearly doubled in size since inception, Atlas has quickly become one of our most important platform businesses," Apollo said in an emailed statement. "We are proud to support the team's success and continuity since its carveout from Credit Suisse."Kim declined to comment.'High-Growth Franchise'In February 2023, Apollo completed the deal with Credit Suisse to add Atlas as one of its platforms that make the loans that Apollo bundles into securities and sells to other investors, its own client funds and its Athene insurance arm. Apollo touted its new unit as a "high-growth franchise" that originates assets coveted by "a broad range of investors."A month later, UBS Group AG agreed to take over the troubled bank as part of a rescue brokered by the Swiss government. While Credit Suisse had agreed to let Apollo manage $20 billion of securitized assets in exchange for fees, the deal was terminated after UBS bought its rival.Meanwhile, Atlas was operating without a broker-dealer license for well over a year. Without it, Atlas has struggled to generate business because — unlike competitors such as big banks — it couldn't easily syndicate deals for clients. Its residential mortgage business was hit hardest by difficulty originating new deals, largely because of the firm's lack of trading capabilities, some of the people said.The firm also shifted away from some of Credit Suisse's existing structured finance business, including government-backed mortgages. It's typically harder for non-banks to compete against Wall Street banks and their ultra-low cost of funding in the market for agency mortgages.Atlas moved toward non-qualified mortgages for borrowers who don't meet traditional underwriting requirements, which it viewed as more attractive than the government-backed market. Despite the pivot, Atlas has also had to deal with a broader slowdown in mortgage originations as elevated interest rates kept homebuyers from refinancing.As a result, the firm has pursued business outside of mortgages, including providing financing to regional banks after last year's crisis toppled several mid-size lenders. Meanwhile, Atlas managed to persuade the vast majority of Credit Suisse clients to stay, allaying concerns some had about working with a non-bank.Staff TensionWhile transferring Credit Suisse's clients, Atlas also transitioned about 180 of the bank's employees to work for the alternative asset manager.The melding of teams caused friction, particularly in the early days of the deal. When Apollo executives tried to dig into the granular details of the portfolio they'd bought as the deal was closing, they struggled to get timely information out of Credit Suisse, some of the people said. Meanwhile, Apollo's hard-driving culture — with its late-night phone calls — spurred disagreements with the ex-Credit Suisse staff over expectations that some people perceived as unreasonable.Some disgruntled junior employees at Atlas began shopping their resumes to competitors, while several senior staff members took their skills elsewhere.Pacific Investment Management Co. is bringing on Jason O'Brien, who was head of Europe at Atlas. Ryan Bernholz, who oversaw investment and securitization of loans, also recently departed.Ares Management Corp. hired Lekith Lokesh, who was a managing director in structuring, and sales managing director Michael Santulli will work for Nomura Holdings Inc. Margaret Dellafera, a residential mortgage team member, is going to Canadian Imperial Bank of Commerce. Trader David Garner was hired by Barclays earlier this year.The employees either declined to comment or didn't respond to requests for comment. Pimco confirmed that it hired O'Brien, and the other firms declined to comment.Kim's ExitWhile some have left of their own accord, Apollo dismissed others as part of team reorganizations. Kim's departure in August was a mutual decision, and he's still looking into his options, some of the people said. He had led the structured products group under Credit Suisse since 2016.Atlas' headcount has grown to about 350 people from roughly 180 when Apollo bought it. As the team expands, Rowan has mandated that its members home in on burgeoning areas of lending such as net-asset-value loans for private equity firms. NAV loans — debt backed by an investment fund's assets — have exploded in popularity as buyout firms look for ways to generate cash for their investors amid a prolonged deal slowdown.There are signs the deal market could be thawing, though, meaning Atlas will have to keep evolving if it wants to meet Rowan's high expectations. The Apollo CEO has pegged Atlas as one of the businesses with the capacity to double its business, and he continues to project optimism that private markets will ultimately win more business than public markets and banks."At the end of the day," Rowan said at the firm's investor day last week, "private will win over public."More stories like this are available on bloomberg.com

Mortgage broker Meridian Capital Group will be freed from a Freddie Mac ban months after Freddie stopped buying loans handled by the firm amid an industrywide crackdown on fraud.Starting on Jan. 1, Freddie Mac will begin considering Meridian-brokered loans again as long as lenders comply with a suite of new conditions. The decision "comes after a thorough review process and enhancements to our lender requirements," a Freddie Mac spokesperson said in a statement. Meridian didn't immediately respond to requests for comment. The move comes amid intense regulatory scrutiny of the commercial real estate market that has sparked several criminal investigations and a tightening of rules for lenders and brokers. As part of the new conditions, Freddie can require lenders that bring in Meridian-brokered business to repurchase loans in the case of default in the first 12 months or if fraud is uncovered, according to a person familiar with the agreement. There will be additional requirements over inspections, audits and the accuracy of information used during the underwriting process, said the person, who asked not to be named because the details of the agreement aren't yet public.Meridian is a major commercial mortgage broker, having secured more than $550 billion in financing since its founding in 1991. Staying in the good graces of Fannie Mae and Freddie Mac is crucial for such firms, which, among other specialties, arrange loans to apartment owners that are eventually purchased and packaged into securities by the two government-sponsored entities.Meridian, which has worked with lenders including New York Community Bancorp, was banned by Freddie and Fannie over allegations that some brokers had fudged figures on applications to obtain larger loans, the Wall Street Journal previously reported. Fannie didn't immediately respond to requests for comment.After Freddie's pause, Meridian in March appointed former regulator Brian Brooks as chief executive officer, replacing the firm's co-founder Ralph Herzka, who became senior chairman. Some executives and brokers left the firm, as a sluggish commercial real estate market and the Fannie and Freddie bans hampered Meridian's ability to broker loans.The scrutiny hasn't been limited to Meridian. US regulators and prosecutors have been cracking down on allegations of fraud in corners of the commercial real estate finance market as higher-for-longer interest rates have made it difficult for investors to paper over shady deals. In June, a New Jersey investor named Aron Puretz pleaded guilty to using false financial statements to obtain nearly $55 million in loans to purchase properties in Michigan, Illinois and Arkansas. In a related case, another real estate player, Boruch Drillman, pleaded guilty in December to deceiving lenders in a $165 million mortgage fraud conspiracy.

Even before the second megastorm in as many weeks brings devastating floodwaters to the Southeast U.S., it's already clear that federal flood-risk maps underpinning decisions by millions of American homeowners and businesses are severely out of sync with a new era of climate-intensified disasters. The best-known guide to flood risk in the U.S. is the Federal Emergency Management Agency's set of flood maps, which designate high-hazard areas where homeowners with mortgages must buy flood policies. Those maps — which are now widely and incorrectly used to understand flood risk more broadly — are often out of date and don't focus on the danger of rain-caused flooding, even as rain storms are supercharged by rising temperatures.That means many more Americans are exposed to flood risk than the maps, and a look at flood-insurance requirements, might otherwise suggest. A Bloomberg Green analysis shows discrepancies between the FEMA high-risk areas and four locations hit by Hurricane Helene's floodwaters: Tampa, Florida; Augusta and Valdosta in Georgia; and Greenville, South Carolina. Bloomberg compared FEMA's publicly available flood maps for the four cities with maximum-flooding estimates from Helene provided by Floodbase, a startup that performs flood analysis and works with providers of parametric flood insurance. The company applies an algorithmic model to satellite images to detect floodwater over geographic areas. Floodbase did not provide data for Asheville, North Carolina, or other areas in the Blue Ridge Mountains, due to the steep topography there and resulting flash flooding, which its algorithm can underestimate. Helene flooding in Tampa, as captured by Floodbase, mostly occurred inside FEMA's high-risk Special Flood Hazard Areas. About 66% of the flooding happened in these zones, while 34% of it was observed outside of them. But in Augusta, less than half (49%) of the flooding observed by Floodbase occurred inside the FEMA high-hazard areas. In Valdosta, it was only 17%, and in Greenville, 24%. FEMA's maps indicate which properties have at least a 1% chance of flooding each year — or put another way, which properties have a one-in-four chance of flooding over the course of a 30-year mortgage. A spokesperson for FEMA said the maps are designed to focus on river and coastal floods rather than extreme rainfall. The maps show minimum standards for floodplain management and the highest-risk areas requiring flood insurance, the spokesperson added, and "are not predictions of where it will flood."Paul Dow, Greenville's city engineer, said local flooding "occurred in areas previously identified to be at risk." The city is still carrying out its post-storm assessment, he said, but investigations so far "did not uncover any surprises." He said the city hasn't yet determined the number of storm-affected properties outside SFHAs, but within them, several dozen properties were affected, in some cases by tree damage only and not by flooding. Greenville recently updated its own city floodplain map using climate data through 2019. "Therefore, updated FEMA floodplain maps would not help the city as much as it would help other communities," Dow said. Only a small fraction of Americans overall — about 4% — hold flood-insurance policies. In coastal areas where hurricanes visit often, like along Florida's Gulf Coast, the rate is much higher, sometimes topping 50%. But inland, it drops off precipitously. Less than 2% of households in Georgia hold policies through the federal National Flood Insurance Program, by far the biggest provider of flood insurance in the country, according to reinsurer Swiss Re AG. In North Carolina and South Carolina the rates are, respectively, about 3% and 9%. The U.S. government doesn't expect homeowners to insure themselves simply out of prudence (although it encourages that). Anyone who buys a home in an area indicated as being high risk is required to purchase flood insurance. The idea is to ensure that vulnerable homeowners are protected. Yet the maps have received criticism for being incomplete and outdated. Although they are revised periodically, more than 3,000 counties still have flood maps that are more than 15 years old, and some have maps far older than that. Many places in rural America and on federal lands aren't mapped at all. "Not only are they often out of date, but they're not very precise," Joel Scata, a senior attorney at the Natural Resources Defense Council, said of the maps. "They operate within the 50th percentile of confidence," meaning they have a high degree of uncertainty.  As criticism of FEMA's maps has grown, private companies have sprung up offering their own flood-risk maps. While these are more granular and account for climate impacts, they aren't quality-controlled and often disagree with each other, a Bloomberg Green investigation found. The agency has a long-running plan to modernize its mapping, and it updated the plan last year. The overhaul will include technology enhancements and integrating climate change impacts into its models. Yet the rollout has been slow. FEMA says ensuring that it's accurate and scalable will require time and collaboration across every level of government. "If these flood maps are greatly underestimating the risk — the actual flood risk that people are facing — then we're not building to the standard we should be building to," said Scata of the Natural Resources Defense Council. "And we're not requiring insurance for people who really need it."

U.S. Treasury yields rose as traders nixed bets on additional Federal Reserve interest-rate cuts this year ahead of inflation data to be released on Thursday.Ten- and 30-year yields reached the highest levels since late July on Wednesday, peaking after an auction of 10-year notes drew middling demand. The moves held after minutes from the Fed's latest policy meeting showed a majority of officials backed a half-point rate cut, even though some would've preferred a smaller move. "There's fear that maybe the Fed is going to be on pause at the next meeting," said Bryce Doty, a bond fund manager at Sit Investment Associates. "If employment is strong, the only thing keeping the Fed on track to cut at all is mild CPI."Bond traders' expectations have been trending in that direction, abandoning wagers on a second half-point rate cut in November in reaction to strong September employment data released Friday. Even a quarter-point cut next month is no longer fully priced into swap contracts, and expectations for one reached a new low of about 75% on Wednesday. A quarter-point cut is still viewed as certain by year-end.The thinking is that Thursday's September consumer prices data — if it fails to show deceleration — has the potential to batter the chances of more than one quarter-point rate cut this year. Dallas Fed President Lorie Logan on Wednesday said the central bank should lower interest rates at a slower pace following its unusually large rate cut last month.At Sit Investment, Doty views the recent rise in Treasury yields — which he said likely also has technical drivers in the mortgage-backed bond market — as a buying opportunity. "If you missed the rally after the Fed cut, here's your second chance," he said. "Who thinks six months from now they're not going to be lowering rates?" Wednesday's 10-year note auction was awarded at a slightly higher-than-anticipated yield of 4.066%, indicative of demand that fell short of expectations. An auction of 30-year bonds is slated for Thursday at 1 p.m. New York time, following the release of the consumer price index report at 8:30 a.m.

Investors will get deeper insights into rural housing profiles within Ginnie Mae guaranteed mortgage-backed securities.Ginnie will share monthly disclosures detailing the number of loans with rural borrowers at the MBS level, and the percentage of unpaid principal balance they represent. This month's rollout is already live, and will be available on the sixth business day of every month going forward, the Department of Housing and Urban Development affiliate said this week. "This enables investors to shift from an over-emphasis upon the insuring agency program by including additional borrower attributes," said Richard Perrelli, product manager, office of capital markets at Ginnie, in a press release. "These factors will help create superlative MBS valuation models."  The agency worked with the U.S. Department of Agriculture and its geographers to accurately define rural borrowers, using the USDA's rural-urban commuting area codes. The codes classify census tracts by population density, urbanization and daily commuting, and borrowers in RUCA Codes 4 through 10 are considered rural for the disclosures. Many mortgage borrowers with loans that the Department of Veterans Affairs or the Federal Housing Administration back live in those areas, Ginnie Mae acting president Sam Valverde said. Ginnie guarantees securitizations of these and other government loans."This expanded rural definition helps demonstrate our commitment to these communities," Valverde said in a press release. "This new disclosure will also give investors a clearer view of the social mission of our securities program." The government corporation recently announced several other modernization updates, including the addition of custodian and servicer/subservicer identifiers in investor reporting. It guaranteed $41.2 billion in issuance in August, nearing a peak reached in September 2022.