December 19, 2023 – Rate Commentary

• December 19, 2023
• realestatelife
• Business & Markets, Fed, Interest Rates, Politics & Economy, Rates, Real Estate, Real Estate Finance, Recession, World News, Your Real Estate Life

UMBS 5.5 100.23 (+5bps)
10yr yield 3.93

Another quiet day as expected. Once again, although there is little urgency to locking, there is little expected benefit to floating. I’d consider locking any loans that are within 30 days of closing simply for peace of mind. We aren’t likely to see any bigger moves until January’s labor market and inflation data hit.

Rate sheets today should be similar to yesterday and maybe a little bit better as rates continue to hold steady. Reprice risk on the day is low despite three Fed speakers who will likely be trying to temper expectations of coming Fed rate cuts in 2024. There is no relevant economic data, just housing starts numbers. The outlook remains the same, that rates are not really in danger of moving much higher or lower at the moment.

Loans closing in less than 15 days should consider locking, although cautiously floating doesn’t appear to be that risky. Rate sheets have been pretty steady the last few days, but without a clear reason to improve from here locking just seems to make sense still.

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 100.28, +9bps on the day and a bit better than yesterday. A clear resistance level is forming for mortgage bonds, right around 100.28, which means we could be capped out for now until something happens to break bonds out of this level. It also means that we are more likely to see bonds lose a bit of ground than move higher, increasing risk that we could see worse pricing before we see better.
The 10yr Treasury yield at 3.92. which is also showing itself as a pretty solid resistance level. The 10yr closed at 3.92 on Thursday and has held very steady within a small window there since then.