December 21, 2023 – Rate Commentary

• December 21, 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 once again similar to yesterday, and reprice risk on the day is low. Markets are seeing low trading volume, as expected, with many traders taking the end of year off. Tomorrow morning we get the PCE inflation data, the Fed’s favored gauge of inflation. Normally I’d say I don’t expect it to cause much movement, but with bonds showing a bit more movement lately due to low trading volume it could cause a bit more movement than normal. With the current momentum, it is likely that it would be good for bonds, however rate sheets may not see much movement. Most lenders will price conservatively tomorrow as the bond market closes at 2pm Eastern and is closed on Monday for Christmas. Although there is not a lot of risk to floating, we’ve not really seen much in the way of improvement. However, because bonds have pushed through recent resistance levels, I’ll move to a cautiously floating stance. I still wouldn’t hesitate to lock anything though.

Loans closing in less than 15 days can cautiously float, bonds are quietly improving just a little bit at a time. I don’t see much change on rate sheets, but right now the risk to floating is really low.

Loans closing in 15-30 days should cautiously float. Like I say above, I don’t see much improvement yet to rate sheets, but bonds are showing just how solid these levels are and the risk to floating has diminished. Now we look to keep our options open a bit.

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 100.47, a bit better than yesterday and +5bps on the day. Most importantly we’ve broken the 100.28 resistance level that I talked about earlier in the week, but some caution is warranted because trading volume is low so we can see some additional volatility.

The 10yr Treasury yield at 3.84, blowing a hole in my theory that it would creep back to 3.92.