Capital Markets Recap – November 6, 2026

Treasuries and Agency MBS rallied meaningfully this week as falling oil prices, geopolitical optimism, and volatility in technology stocks encouraged safe-haven demand, pushing the 10-year Treasury yield below 5 percent to its lowest levels since September. However, stronger-than-expected economic indicators (e.g., October payroll growth of 165k, productivity growth of 3.6 percent, low initial jobless claims of 189k, rising job openings, and resilient manufacturing activity) suggest the economy remains relatively healthy and could temper expectations for additional Fed rate cuts. Wider primary-secondary spreads also limited the extent to which Treasury market improvements translate into lower borrower rates. 

Origination activity has weakened considerably: According to Curinos’ proprietary application index, funded mortgage volume declined 36 percent year-over-year and 13 percent month-over-month, with retail volume falling 40 percent and 15 percent, respectively. The average 30-year conforming retail funded rate increased to 6.93 percent, up 35-basis points from September and 65-basis points from October 2025, though we should see relief by the next time this prints. Refinance activity remains particularly weak, with applications down 60 percent annually.

Mortgage credit modernization is once again in the news: VantageScore adoption does not necessarily eliminate the need for Classic FICO, as most private investors reportedly continue to request both scores and may eventually apply different pricing to account for perceived differences in credit risk. The introduction of additional scoring options, including the anticipated 10T model, could create incentives for lenders to select the most favorable borrower score while investors increasingly scrutinize all available credit information. 

Beyond traditional origination, changing borrower needs are creating opportunities in home equity lending, servicing, and more personalized mortgage solutions. HELOCs offer attractive margins and valuable opportunities to recapture existing customers. Adjustable-rate mortgages (ARMs) are also attracting greater interest, accounting for approximately 10 percent of applications as their rates remain roughly 80-basis points below comparable fixed-rate loans. However, borrowers facing adjustments on existing ARMs may experience significant payment increases, creating both retention challenges and potential opportunities for originators. Rising property taxes, homeowners insurance premiums, utility expenses, and climate-related risks increasingly influence the long-term affordability of homeownership. Helping borrowers navigate these costs throughout the life of their loans could become an important differentiator for lenders and servicers. 

The midterm election results produced a divided government, potentially limiting additional tax cuts and deficit-financed spending that might otherwise push Treasury yields higher, while introducing uncertainty around future regulatory and fiscal priorities. Historically, expectations surrounding Republican policy initiatives have contributed to higher Treasury yields, making the prospect of legislative gridlock potentially supportive of mortgage rates. The combination of persistent affordability pressures, limited refinance opportunities, evolving credit standards, and increasing competition in home equity products reinforces the importance of operational flexibility, diversified revenue streams, and stronger borrower relationships.

With liquidity potentially tightening into year-end, lenders should prioritize flexible capital markets positioning while monitoring Treasury issuance, inflation, and the Fed’s December policy decision. Election-driven shifts in federal regulatory priorities and increasingly active state oversight are creating uncertainty around mortgage compliance, particularly regarding CFPB activity, FHA/VA requirements, and loan officer compensation, requiring lenders to remain vigilant as regulations evolve. As always, rates and spreads remain sensitive to shifting economic data, geopolitical developments, equity market volatility, and changing political expectations.