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Rate sheets should be about the same as yesterday if the current levels hold (we get consumer confidence data at 10am ET, right around when rate sheets start coming out, and it could shake up bonds and affect pricing). Although mortgage bonds gained ground through the afternoon yesterday, giving a handful of lenders room to reprice better, those gains have lost ground this morning. Pricing should continue to be pretty much the same we saw early last week.
Reprice risk today is low, once the consumer confidence number comes out there is nothing happening until the 7yr Treasury auction at 1pm ET, and that shouldn’t cause any issues. Tomorrow we get the revised GDP numbers, as well as the Fed’s Beige Book in the afternoon… if either or both of those show any signs of economic weakness it will help pricing improve just a little bit.
Rates are stable, the outlook remains that the Fed is done hiking rates and is now winning the battle over inflation. This week’s PCE inflation data, the Fed’s favored inflation gauge, could help support that story, as well as the consumer confidence data and updated GDP numbers. We aren’t likely to see rates fall much even if the data comes in favorably, but we could see rate sheets improve some just the same.
The real action will start next week with all of the different labor data, and then continue the following week with more inflation data and the Fed meeting. Unless we get unexpected signals that would lead markets to fear a Fed rate hike, rates should remain stable and floating makes sense. If the labor data next week shows any signs of a softening labor market, bonds will rally. Let’s not forget that it was this month’s jobs report that helped fuel the rate rally we are enjoying now. The following week’s inflation data and Fed meeting could help bring rates lower.
Loans closing in less than 15 days should cautiously float. These loans will likely not have time to really see rates improve from here, since they will be locked and closed before the real action starts in December. These loans likely see pricing ebb and flow a bit, but won’t see rates really move much.
Loans closing in 15-30 days should float. Those on the shorter end of the calendar may also miss out on the best rates, if data comes in favorably helping to push rates lower. However, loans with a bit of time that can make it past the Fed meeting on 12/13 could benefit.
Loans closing in 30+ days have little to fear and should float. These loans are in the best position right now to see rates improve before the end of the year.
Technicals:
The UMBS 6.0 coupon is at 99.77, -20bps on the day but still a few basis points better than yesterday when I wrote the commentary. Not much of a chance we see a big move either direction ahead of next week.
The 10yr Treasury yield at 4.41, improved from yesterday’s 4.45 and clearly supporting the lower yields that markets feel are appropriate with future Fed rate hikes off the table.
