November 15, 2023 – Rate Commentary

• November 15, 2023
• realestatelife
• Business & Markets, Fed, Interest Rates, Politics & Economy, Rates, Real Estate, Real Estate Finance, Recession, World News, Your Real Estate Life

12/15/23 WRAP UP

UMBS 6.0 99.31 (-23bps)
10yr yield 4.54

Once the initial activity was over, the day was a snoozefest. It’s likely we see some bouncing around from here, but not any definite moves higher or lower for rates. Loans with time could see improvement after Thanksgiving, with December data and the Fed meeting though, although loans closing near term likely just see some volatility from day to day.

Rate sheets this morning shouldn’t be too different than yesterday, despite a weak start for mortgage bonds which are giving back some of yesterday’s gains. Yesterday saw mortgage bonds improve +90bps after markets celebrated a solid inflation report that makes it likely the Fed rate hiking is over. Very few, if any, lenders will put that much improvement on a single rate sheet… especially when it comes all at once like it did yesterday. Today’s losses may show up a bit for some, but most lenders have room to “absorb” the losses today, and rate sheets shouldn’t be too different. In fact, some may even improve, as lenders grow comfortable that bonds are holding the majority of the gains and may even improve from here and lenders pass along more of the gains that they held back from yesterday. Rates have been volatile, bouncing up and down, and we’re likely to see more of that.

This morning’s data included declining wholesale inflation, as well as a falling retail sales. However, retail sales didn’t fall as much as was expected, so bonds not loving that show of economic resiliency. Bonds were already down on the day to begin with, just some resettling after such big moves yesterday.

For loans closing in less than 15 days, cautiously float but don’t be afraid to lock. Wait and see how the day plays out, see if we recover some of the losses. It may make sense to float into tomorrow, depending on how much time until closing and what today’s rate sheets look like. However, if we see bonds lose ground, consider locking.

For loans closing in 15-30 days, float. Loans that have time want to wait and see what the jobs data brings after Thanksgiving, and could see more improvement in pricing with some patience.

For loans closing in 30+ days, float. The current outlook is that with another jobs report showing a solid but softening labor market, and another CPI report 12/12 right before the Fed meeting concludes on the 13th, these loans have the best shot of seeing even lower rates if data continues to come in favorably.

Technicals:

The UMBS 6.0 coupon is at 99.19, -36bps on the day and about the same from when pricing came out yesterday. After closing above the 100-day moving average yesterday (99.37), mortgage bonds couldn’t hold the gains and fell below it today. That 100-day moving average could prove to be a solid resistance level and block rates from improving much more for awhile.

The 10yr Treasury yield at 4.53, creeping back up but still way below the 50-day moving average at 4.61.