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Listen Live
Saturday’s: 9AM 1590 AM/97.9 FM KVTA
Sunday’s: 7AM K-EARTH 101 FM
UMBS 6.0 100.72 (-13bps)
10yr yield 4.23
Although this mornings jobs data was a bust for better rates, it didn’t hurt things much. There is still hope that next weeks inflation data and Fed meeting could see rates move a bit lower, but this is the first sign that we may see this rally losing steam. Most loans should still float into next week, only near term risk averse closings should consider locking yet.
Rate sheets this morning will be a bit worse than yesterday after stronger than forecast jobs data, but bonds are recovering and reprice risk is low. The initial reaction to the stronger jobs data was bad for bonds, but in the ninety minutes since the data was released mortgage bonds are actually better than when the data came out. There is still a good chance that we see rates improve at least a little bit more next week when the CPI inflation data comes out on Tuesday and the Fed meeting ends on Wednesday.
Jobs data showed 199,000 jobs created versus the 185,000 estimated. Wages rose 0.4% as well, and unemployment dropped to 3.7%. Markets were looking for the jobs data to show a softening labor market, like the report last month showed, in order to support the speculation that the Fed will start cutting rates in March.
Loans closing in less than 15 days should cautiously float. Definitely don’t lock until later in the day, giving bonds more time to recover. The sentiment in favor of lower rates took a small hit this morning, but is still strong. Loans that are highly risk averse may consider locking later today, but I suggest anyone with the risk tolerance still float into next week.
Loans closing in 15-30 days should float. The strong recovery in bonds after the dust settled this morning points to how strong the betting by markets that the Fed will cut rates in March remains. We can’t guarantee that next week will bring lower rates, but it is still a very strong possibility.
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 100.66, -19bps on the day and better than when the jobs data came out this morning. The losses we still see are due to overnight trading.
The 10yr Treasury yield at 4.22, moving back up from yesterday’s 4.14. Next week brings another shot at seeing it break into the 3.xx’s though.
