August 24, 2023

• August 24, 2023
• realestatelife
• Business & Markets, Fed, Interest Rates, Politics & Economy, Rates, Real Estate, Real Estate Finance, Recession, World News, Your Real Estate Life

Rate sheets likely to give back some of yesterday’s gains, which didn’t quite match up to the gains in bonds to begin with. What I mean is that mortgage bonds improved to levels last seen 8/14, when rates were .375 to .25% better. However, most rate sheets improved about .125%, some a little more. That’s normal, we all know that rates move up a lot quicker than they come down. 

Reprice risk on the day is moderate, we could see some movement as rumors come out of the Jackson Hole Symposium, and it feels like that time in the horror movie when you say, “What are you doing going down in the basement by yourself, DON’T OPEN THAT DOOR!!!” – meaning I feel like the music is building and the anxiety is increasing with it. I feel like we have another big jump in rates on the horizon, and tomorrow could be the catalyst… as Powell’s speech last year was. Today should be pretty tame though, as traders wait to see what Powell says tomorrow.

There is nothing that guarantees tomorrow will be bad for rates… but it is an unknown, and unknowns as a rule are scary. The current economic and labor market environment are setting up rates to move higher, not lower. Although there are little tidbits here and there that we can point to on each that we can say signal coming weakness, the bottom line is that we aren’t seeing weakness NOW. This morning’s jobless claims dropped to the lowest number in 3 weeks, despite Hawaii’s fire causing claims to jump there. I feel like we have a huge pile of dry wood and kindling, and we’re just waiting for a match to burn it all down. Yesterday was like a strong rainy day… it reduced the risk temporarily, but wasn’t a solution or a sign that the pile went away. So what will the match be? Will Powell spark a flame tomorrow? Will it be next week’s jobs data?

For all loans, my advice is to lock. I’m not saying that we can’t see rates improve if a bunch of things go our way… tomorrow’s speech by Powell, jobs data next week, CPI inflation data on the 13th… However, I think I’ve made my case above on why I would just lock and be done with it.

Technicals:

The UMBS 6.0 coupon is at 99.52, -9bps. Today’s performance points to yesterday simply being a consolidation trade rally, and not anything to get too excited about. Rate sheets improved, which everyone got excited about, but it really wasn’t that significant of an improvement, most rate sheets .125% to .25% (which don’t get me wrong, feels like a big move, but as high as rates have moved, is that really anything more than a feel good move?)

The 10yr Treasury yield at 4.20, which is fitting because a yield this high feels like you’re smoking something.