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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 this morning will be similar to Friday and maybe a bit better for some. Reprice risk on the day is low, although we will see a 10yr Treasury auction at 1pm Eastern today. It is tomorrow’s CPI inflation data and Wednesday’s Fed meeting that will decide the near future of rates. The outlook is a little less rosy than a week ago after Friday’s jobs data failed to dazzle us, and Fed futures are now showing the chances of a March Fed rate cut to be back below 40%. Floating now has more risk, especially for loans closing in the shortest window.
We’ll talk more about the Fed meeting tomorrow, however it is important to recognize that it will shape the future of rates for the rest of December. If the inflation data doesn’t help us tomorrow, it will become much less likely that we will see much help from the Fed meeting and Fed Chair Jerome Powell’s press conference. However, a reading that shows inflation continues to improve will help pricing and will
Loans closing in less than 15 days should cautiously float. Pricing is still near the best levels, and loans that are not willing to take the risk of losing ground should strongly consider locking later today or at the first sign of trouble. Although bonds were able to recover from Friday’s disappointing jobs data they still pulled back from the best levels seen midweek. If tomorrow’s CPI inflation data reignites market’s belief that the Fed will be forced to cut rates in March, pricing could improve. However, a disappointing reading could see rates start to creep a bit higher ahead of a the Fed meeting.
Loans closing in 15-30 days should float. Loans that have time should continue to float and see if the next couple of days bring better rates. Only loans that are highly risk averse should consider locking here.
Loans closing in 30+ days should float. We have finally crested the mountain, and are starting to descend the other side. Time will only help rates at this point, so no reason to rush into locking. There will be times when rates move back up a bit before falling, but it is more likely we see rates creep slowly lower than move higher over time.
Technicals:
The UMBS 6.0 coupon is at 100.55, -17bps on the day. This is still much better than where mortgage bonds were immediately following the release of Friday’s jobs data though.
The 10yr Treasury yield at 4.27, moving higher once again after reaching a rally low of 4.11. We could see it drop again if the next couple of days go our way, but if not we could see it push up to 4.39 before testing technical support.
