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Saturday’s: 9AM 1590 AM/97.9 FM KVTA
Sunday’s: 7AM K-EARTH 101 FM
Listen Live
Saturday’s: 9AM 1590 AM/97.9 FM KVTA
Sunday’s: 7AM K-EARTH 101 FM
Rate sheets will come out reflecting whatever take the market has on Fed Chair Jerome Powell’s speech from Jackson Hole today at 10:05am ET. The initial start to the day sees mortgage bonds a bit on the weaker side, and if pricing came out right now it would be slightly worse than yesterday. However, there is likely to be some kind of reaction to Powell this morning, and rate sheets will come out after that and reflect the moves. The longer term outlook hasn’t changed though… we are not in a position to see rates improve much from here, although there is always a chance next week’s jobs data could start a small rally ahead of the CPI data on the 13th… but that’s more wishful thinking and outside chances than I’m willing to bet on.
Reprice risk on the day is low after initial rate sheets come out… once Powell speaks and markets react, traders will turn into ghosts for the rest of the weekend.
Markets are looking at another Fed rate hike, likely to come in November, as a much stronger possibility… but not yet a probability. In other words, markets are still pricing in less than a 51% chance that it will happen, with Fed futures reflecting a 41% chance that the Fed will raise rates again in November. That number could shoot up today if Powell takes a hawkish stance, and if markets buy what he is selling. We are less likely to see bonds react in a way that would see rates drop, although that is possible if markets feel like Powell is telegraphing that the Fed has its foot on the brake. At this point, with as much talk as I’ve read about it, the I am starting to feel like the event will fail to live up to the hype… like eating an Impossible burger.
For all loans, my advice is to start the day cautiously floating… the time to lock was before now… and see what happens around 10am ET. If markets move worse, I’m going to be in a lock stance again. If we see a bleh reaction, I’m also in a locking stance. Lastly, if markets rally, then we can consider floating into next week and a week full of jobs data… but even then, I’d lean more towards locking.
Technicals:
The UMBS 6.0 coupon is at 99.44, -3bps but better than where it started after overnight trading. We won’t really see big moves until Powell speaks, but if he doesn’t dazzle the crowd we are likely to see bond prices fall next week bringing worse rate sheets.
The 10yr Treasury yield at 4.24, moving back higher from yesterday’s lows. If Powell doesn’t light off some fireworks today, it is likely we see it move higher again next week.
