December 4, 2023 – Rate Commentary

• December 4, 2023
• realestatelife
• Business & Markets, Fed, Interest Rates, Politics & Economy, Rates, Real Estate, Real Estate Finance, Recession, World News, Your Real Estate Life

Rate sheets this morning will be better than Friday’s rate sheet, more in line with any reprices better you got on Friday. Reprice risk today is low, but remember that tomorrow morning brings JOLTS data as well as some ISM data that could shake things up. However, my current “guess” is that rates will improve this week, at least a little bit, although it may not happen till Friday’s data. Markets are now pricing in a Fed rate cut to happen in March, when only a couple of weeks ago it was June. Mortgage rates will fall on speculation that the Fed will cut rates, as we have started to see with mortgage rates coming down almost a point from October’s highs.

This week is part of a one-two punch combination. This week brings the labor market data, while next week brings the inflation data and the Fed meeting. Markets will continue to look for any sign that the economy is weakening and the labor market is softening. We get JOLTS tomorrow (job opening and labor turnover survey), ADP private payrolls on Wednesday, the weekly jobless claims data on Thursday, and the non-farm payroll, wage and unemployment data on Friday. Last month’s labor data showed the first sign of softening, and sparked a rally that helped rates move lower. Hopefully this week does the same.

Next week we get the CPI inflation data on Tuesday, and the wholesale data on Wednesday. The Fed will release its policy statement on Wednesday afternoon, followed by Fed Chair Jerome Powell’s press conference where things will really get interesting. The Fed members are on a blackout between now and the meeting, so we won’t hear any more opinions on where things are headed… at least not from them.

Loans closing in less than 15 days should float. Rates have been creeping lower, and could continue to do so this week. However… there IS some risk, and for loans that don’t want to take that risk they should lock before Friday.

Loans closing in 15-30 days should float, because the outlook is that we could see rates fall to the best levels since April.

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.

Technicals:

The UMBS 6.0 coupon is at 100.56, which is -27bps on the day but still much better than when pricing came out on Friday.

The 10yr Treasury yield at 4.27, and like mortgage bonds although that is higher than Friday’s close of 4.20 it is still better than Thursday.