Bonds gave back all of Friday's rally and more. UMBS 6.0 closed at 98.20, down 64 cents, and the 10-year finished at 5.234%, up 7.4 basis points. The average 30-year fixed hit 7.50%.

Most of the damage came early. By 11:00 AM ET mortgage bonds were down more than five-eighths of a point and the 10-year had touched 5.266%, the high of the day. The afternoon brought only a small bounce. What stands out is what oil did. Crude gave back its early gains and finished about unchanged, and yields still closed higher. For months the rate climb has tracked oil closely enough to hope that cheaper crude would bring relief. Today that link didn't hold. The selling looks like it belongs to the bond market itself now: strong economic data, the expectation of more strong data, and a heavy supply of Treasuries and mortgage bonds to absorb. Quarter-end positioning may be adding to it, but nothing on the tape confirms that.

For borrowers, this is the first time the average 30-year rate has reached 7.50% since April 2024. The Fed debate is still hold versus hike, and the Philadelphia Fed's Paulson said this weekend that September's move may not be the last. The rest of the week has real data. PCE inflation lands Wednesday and the September jobs report on Friday, both at 8:30 AM ET. Soft numbers could pull rates down quickly, because the bond market has sold off hard. Strong numbers would add to a climb that already has momentum.

— David Burson, NetRate Mortgage