August 22, 2023 – Rate Commentary

• August 22, 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 6.0: 99.05 (-3bps)
10yr yield: 4.33

Bonds improved a bit through the day, and a handful of lenders improved pricing from this morning. However, this is far from anything to get overly excited about, as most rate sheets are still trending worse… just at a slower pace. Advice remains to lock all loans, even if we may see a day or two of small gains it isn’t worth floating in this market.

Rate sheets likely to be a bit worse than yesterday, and reprice risk on the day is low. There are a handful of wholesale lenders who reprice when a bird farts though, so if you’re working with one of them there is always risk of reprice, but for the rest we don’t have any economic data to worry about or any other external events that should shake things up. Make no mistake about it though, rates are not going to improve much from here, if at all, and are marching into the 8’s. The only reason we would see rates fall back for a bit is if we get favorable jobs data next week (JOLTS, ADP, non-farm payrolls, wages) that shows some softening to the labor market, or when we get the next CPI inflation report September 13th. Even if that happens, it won’t be much of a recovery.

Markets are slowly pricing in a higher probability of another Fed rate hike this year, most likely to come at the November meeting. We could see a full shift to pricing in a hike as early as later this week, when Fed Chair Jerome Powell speaks on the outlook of the economy at the Jackson Hole Economic Symposium, which would put pressure on mortgage rates and push them higher.

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, and lower rates become less likely.

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 6.0 coupon is at 98.95 this morning, down -13bps and showing a lot of volatility.

The 10yr Treasury yield at 4.35, showing no signs of rising yields stopping. I’m