August 7, 2023 – Rate Commentary

• August 7, 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 5.5: 98.89 (-18bps)

10yr yield: 4.10

Quiet day, not a lot of risk floating into tomorrow although pricing could slip a little bit.

Rates sheets this morning should be better than Friday’s AM rate sheets but likely worse than any reprices better, at least to start the day. Bonds woke up to big losses, due to overnight trading, but have recovered quite a bit before lenders start setting rates. Reprice risk on the day is low, there isn’t any economic data that should cause any waves or other big events.

Friday saw bonds rally strong, much stronger even than was warranted by the mixed jobs data, helping rates head towards recovery after losing ground all week. The good news is that the outlook has once again improved, especially with consumer and wholesale inflation data coming at the end of this week. Markets continue to ignore Fed members who call for more rate hiking, pricing in about a 30% chance that we could see one more Fed rate hike by the end of the year. Besides the inflation data at the end of the week, markets will be closely watching the Treasury bond auctions taking place this week.

For all loans, cautiously float. It looked bleak for rates today at 8am ET when bonds were down about three times as much as they are now, but is looking much more optimistic as we’ve seen a strong bounce back. Rates aren’t likely to go down much from here unless we get some help from Thursday’s CPI inflation data, and we’ll likely want to try and float into it unless the outlook changes.

Technicals:

The UMBS 5.5 coupon (MBS or mortgage backed securities) at 98.92,  off from Friday’s best levels but still significantly better than the lows we saw last week. The recovery for mortgage bonds that started on Friday helped unwind the oversold situation that mortgage bonds were in. We could see some volatility ahead of Thursday’s inflation data, but if things go our way like they did last month we could see some further improvement.

The 10yr Treasury yield at 4.07, well below where it was Friday morning. We may not see the 3’s again though until later in the week with the inflation reports.