August 23, 2023 – Rate Commentary

• August 23, 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: 99.61 (+52bps)
10yr yield: 4.19

Bonds rallied early and peaked as pricing came out around 10am ET, holding the gains all day but not improving further. Tomorrow could bring more improvement to rate sheets, but it is far from guaranteed. Is it worth floating into tomorrow to try for more? Depends on what you saw today on rate sheets, and how disappointed you’d be on missing out on it. Lock accordingly.

Rate sheets will improve today as bonds rally, but reprice risk on the day is high. After selling off as long and as hard as we’ve seen, a consolidation is normal and may even last for a couple of days. However, this is not a reversal in the trend, and although rate sheets will retreat a bit, we’ll want to lock in those gains when we think the ship is about to sail again. Cautiously float to start the day, especially because some lenders may need more convincing than others before putting the gains on the rate sheet, but then consider locking sometime soon to protect the win. Friday’s speech by Fed Chair Jerome Powell could rain on this parade, or give this rally legs.

For loans closing in less than 15 days, cautiously float to start but lock at the first sign of trouble. Not sure how many loans out there are this close to closing and floating, and not sure why they would be… but if somehow that is the case keep floating for the moment but be ready to lock.

For loans closing in 15-30 days, the advice is to cautiously float for the moment. Once again I will repeat that I don’t think this is the highest we will see rates go, and we will want to be careful to lock at the first sign of trouble, but we could see rate sheets improve a bit further in the near term.

For loans closing in 30+ days, cautiously float for now. These loans may even consider floating into next week’s jobs data, but we might have a clearer picture of that after Friday’s speech by Powell.

Technicals:

The UMBS 6.0 coupon is at 99.58, +48bps on the day as bonds take a breath from selling off. This brings bonds back to levels last seen a little over a week ago, when rates were about .25% better. Don’t expect that all to pass on to rate sheets though, more likely rates are about .125% better today.

The 10yr Treasury yield at 4.23, the first big drop we’ve seen in a couple of weeks.