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Saturday’s: 9AM 1590 AM/97.9 FM KVTA
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Listen Live
Saturday’s: 9AM 1590 AM/97.9 FM KVTA
Sunday’s: 7AM K-EARTH 101 FM
Rate sheets this morning will continue to see rates creeping higher, and reprice risk is moderate on the day. Rates look likely to move higher this week, unless we get help from inflation data and retail sales data. Talk of how a change in the way health insurance costs are tabulated for the CPI inflation data is not sounding favorable, instead creating whispers that we could see a surprising jump in inflation numbers tomorrow. That would be bad for rates, and isn’t worth the risk for most loans in my opinion. I strongly suggest locking near term closings for protection, and considering locking any other risk averse files. I’m not in a full on locking stance though, only because markets know we will see the change in how the CPI data is calculated and may not react as severely as normal if we do see it.
Friday had a window of surprising volatility for mortgage bonds in the early afternoon before rebounding, as well as some more volatility very late in the day. We saw some reprices worse, but not as many as you might expect. Last week wasn’t great for a lower interest rate outlook, with the Fed officials unable to signal that they were done raising rates. If the inflation data shows stubbornly rising inflation, that could be very bad this week, as well as retail sales showing economic strength.
For loans closing in less than 15 days, lock. Unless desperate to gamble, these loans likely want to avoid the potential to see rates jump over the next couple of days as we get consumer and wholesale inflation readings and retail sales data.
For loans closing in 15-30 days, lock. If rates move higher this week, we may not see them drop again until it is too late for these loans, as it would take some help from next month’s data and Fed meeting.
For loans closing in 30+ days, cautiously float. These loans have the time to see more jobs data, as well as another inflation reading and the next Fed meeting. There is a lot that could happen to help rates drop again between now and a month from now, and these loans can take the risk to get there, especially loans that are closing much further out.
Technicals:
The UMBS 6.0 coupon is at 98.20, quite a bit lower than Friday’s start and down about -25bps on the day. Mortgage bonds have lost ground since peaking last Wednesday, as has the 10yr Treasury yield. Today mortgage bonds started the day at the 50-day moving average but have fallen below it (98.46). We were hoping the 50-day moving average would provide some technical support, although it wouldn’t matter much heading into tomorrow’s CPI inflation data.
The 10yr Treasury yield at 4.69, moving higher after failing to break through resistance at the 50 -day moving average. If tomorrow’s inflation data comes in showing increasing inflation, as is anticipated, we could see a jump in the 10yr yeild that would open the door for mortgage rates to move higher.
