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Saturday’s: 9AM 1590 AM/97.9 FM KVTA
Sunday’s: 7AM K-EARTH 101 FM
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UMBS 5.5: 97.58 (-16bps)
10yr yield: 4.29
Bonds clawing back some gains after hitting the worst levels of the day and triggering some reprices worse, but nothing to be excited about. The outlook remains that we will see rates move higher, and the advice remains to lock.
Rate sheets likely to be similar to yesterday, and reprice risk on the day is once again moderate. Yesterday saw quite a few reprices worse as mortgage bonds lost ground until a last hour rally. Rates have now surpassed last October’s highs on most rate sheets, and the “fun” ain’t over yet. Markets still not fully pricing in the idea that the Fed could raise rates again before the end of the year, but we could see that change late next week as Fed Chair Powell speaks at the Jackson Hole symposium. Any improvement we see on rate sheets will be short lived and simply a result of consolidation, bonds are not in any position to improve much from here. Markets are adjusting to the idea that we won’t see a recession, but instead will see a soft landing for the economy, and that means higher rates are here to stay for awhile. Although these rates downright suck, the advice remains to lock.
For loans closing in less than 15 days, continue to lock. Until we see an end to this current trend, there is no reason to float these loans. Each day simply brings higher rates and worse pricing than the last, and there is no reason to expect this to end yet.
For loans closing in 15-30 days, the advice is also to go ahead and lock. With each passing day, these rates become more entrenched. Bonds are losing ground, and it’s easy to pick any or all of these reasons: ballooning Treasury supply, a still-hawkish Fed and an economy that has yet to show the strain of more than 5 percentage points of rate hikes.
For loans closing in 30+ days, consider locking. I’m becoming less and less hopeful that next month’s labor and inflation data will help bring rates down a bit, and am instead thinking even if that happens rates will have moved so much higher that we’ll be back to where we are now as a best case scenario. I’d strongly consider locking at this point, and just throwing in the towel.
Technicals:
The UMBS 5.5 coupon (MBS or mortgage backed securities) at 97.61, down about -8bps. Still much better than yesterday’s low of 97.31, but for how long? Going to be time to switch to the 6.0 coupon soon, but the 5.5 has more trading volume so is a smidge more reliable at the moment.
The 10yr Treasury yield at 4.27, and while that is better than yesterday’s 4.30 it is still much higher than the 4.23 low that was hit in overnight trading.
