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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
Rates sheets this morning poised to be about the same as yesterday, unless we see more volatility this morning before lenders set pricing. If the current gains hold we could see slightly better rate sheets, but nothing to get too excited about. One the morning drama plays out reprice risk on the day should be low… the last couple of Fridays have been quiet and I anticipate this one will be the same once traders leave their laptops behind (they are probably already at their houses in the Hamptons). Lots of movement this morning with the jobs data, but the bottom line is that rates aren’t really going to change much, both a victory and a defeat at the same time. Be aware though, it is possible we could see this morning’s gains disappear and put lenders in a position to reprice worse.
The jobs data this morning was a mixed bag… the number of new jobs created (187,000) was below expectations (200,000), which would signal a softening labor market and would be good for bonds and rates. However, the unemployment number ticked down from 3.6% to 3.5%, which signals strength, especially when the participation rate remained about the same… meaning we didn’t see unemployment drop simply because less folks were in the hunt for a job and don’t then count as unemployed. The last piece of data was that hourly earnings was up… 0.4% from June and 4.4% from a year earlier, both stronger than forecast and inflationary.
The initial reaction to the news was that bonds lost ground, but since then have rebounded into positive territory. If the gains hold, it could be enough to see slightly better pricing on this morning’s rate sheets, but lenders will likely be slow to pass along the slim gains onto most rate sheets with weekend exposure anyway. Weekend exposure means that any new loans taken and locked wouldn’t be able to be hedged until Monday, and we could see pricing a lot worse then, so lenders tend to be a bit more conservative in the pricing to protect themselves.
For loans closing in less than 15 days, cautiously float. Both mortgage bonds and the 10yr Treasury yield are testing technical support and showing signs that we could see some rebound heading into next week’s CPI inflation data. The net positive reaction this morning after the labor data shows that markets want to see bonds improve a bit from here, although it isn’t likely to be much. Don’t be afraid to lock any loans you want to protect, we aren’t out of the woods yet, but floating could pay off a little bit.
For loans closing in 15-30 days, cautiously float. There is risk to floating, and if you don’t want the risk then by all means lock. However, we could see rates fall back a little bit heading into next week’s CPI inflation data, and if we are going to see any recovery our best chance to do so will be next week.
For loans closing in 30+ days, cautiously float. The outlook is only slightly brighter than it was over the last couple of days, but especially for loans with time we should see what next week’s CPI inflation data brings.
Technicals:
The UMBS 5.5 coupon (MBS or mortgage backed securities) at 98.59, +22bps on the day after a lot of early weakness. It is way too early to celebrate, but next week and the CPI inflation data is our best chance to see rates continue to improve if we get anything close to a replay of last month’s action.
The 10yr Treasury yield at 4.14, down quite a bit from the day’s highs. Let’s see if it ends the day better than yesterday’s 4.18 or not though.
