December 15, 2023 – Rate Commentary

• December 17, 2023
• realestatelife
• Business & Markets, Fed, Interest Rates, Politics & Economy, Rates, Real Estate, Real Estate Finance, Recession, World News, Your Real Estate Life

Rate sheets today either similar or just slightly worse than yesterday, and reprice risk on the day is moderate. The tea leaves are pointing to this rally being at the end of its leash for now, and I stand by yesterday’s suggestion to lock any loans that are closing in the next 30 days or so. Although we will get PCE inflation data next week, there’s really nothing else that anyone can point to that will push rates lower from here until we get to January. While I don’t think that rates will go much higher from here, I don’t see a lot of potential to floating.

New York Fed Reserve President John Williams was out this morning trying to temper expectations and set the market straight, throwing cold water on the optimism for a March rate cut. Williams told CNBC it was “premature” to be thinking about a March cut, and Williams has clout… second only to the big Powell himself… so markets listened and Fed futures started to slide on that March cut. Bonds didn’t like Williams comments and took a dive, but rebounded rather quickly. Still, this shows just how fragile things are right now, and we could see rates take a quick jump up .125 or .250. While not earth shattering, the risk makes locking look pretty good to me.

Loans closing in less than 15 days should consider locking, especially if mortgage bonds worsen through the day. Like I say all the time, I don’t have a crystal ball, but the odds are now in favor of taking these great rates and running.

Loans closing in 15-30 days should consider locking. We aren’t likely to see rates move much lower from here at least until January, and we’ll need help from the jobs data and unemployment numbers as well as the CPI inflation data that comes after. That’s too far away for these loans to benefit, and without any clear reason to expect further improvement after an epic run the last couple of days, I’m locking and not looking back.

Loans closing in 30+ days should cautiously float. These loans don’t need to worry about locking yet, because even if rates creep up a bit they will likely fall again in January.

Technicals:

The UMBS 5.5 coupon is 100.27 or -5bps on the day. However, that’s about -20bps from when pricing came out yesterday.

The 10yr Treasury yield at 3.93, and while it is impressive that it remains below 4 I just don’t trust it yet.