August 10, 2023 – Rate Commentary

• August 10, 2023
• realestatelife
• Business & Markets, Fed, Interest Rates, Politics & Economy, Rates, Real Estate, Real Estate Finance, Recession, World News, Your Real Estate Life

WRAP UP
UMBS 5.5: 98.50 (-58bps)
10yr yield: 4.11

What should have been a quiet day got out of hand quick, with lots of lenders repricing worse (and some twice) Great example today of bond selling triggering more selling… and it wasn’t due to the CPI data, or really much else to point a finger at. Very likely we see bonds rebound tomorrow after being oversold today, no reason to lock now, wait and see what tomorrow brings.

Well, it looks like I got lucky on this one… this is what I wrote in yesterday’s commentary…

“I think despite the forecast that the data won’t be all that great, we will see rates do just fine. A surprise improvement would definitely bring a rate rally, so keep your fingers crossed.”
 

And my friends, we must have crossed enough fingers, because rate sheets today should be better than yesterday and reprice risk on the day is low. There was a bit of touch-and-go volatility right after the CPI inflation data came out this morning, but bonds quickly started to rally and are up nicely on the day.

The CPI inflation numbers came in mostly right where they were expected to be or a little better. Markets knew we were going to see a higher number this month and were prepared for it, that’s why we aren’t seeing a negative reaction. Instead whe you dig through the numbers a bit, and look past the rounding up, we see inflation is actually softening in quite a few categories.

For you numbers folks, here you go:

Prices rose 0.2% in July from the previous month, the same as in June.

Core CPI rose 0.2% in July from the previous month, also the same as in June.

Prices rose 3.2% from a year ago. That’s compared to a 3% increase the previous month.

Core CPI rose 4.7% from a year ago, compared with a 4.8% increase the previous month.

For loans closing in less than 15 days, cautiously float. Today may be a good day to take what’s on the rate sheet and run, especially if we do see an unexpected turn for the worse. However, we could see bonds continue to improve tomorrow if the wholesale inflation data also comes in well.

For loans closing in 15-30 days and 30+ days, float. There is no reason to lock any of these loans at the moment unless risk averse. Rates are not likely to improve too much, but do have room to improve further from here.

Technicals:

The UMBS 5.5 coupon (MBS or mortgage backed securities) at 99.25, +17bps on the day.

The 10yr Treasury yield at 3.99.