November 29, 2023 – Rate Commentary

• November 29, 2023
• realestatelife
• Business & Markets, Fed, Interest Rates, Politics & Economy, Rates, Real Estate, Real Estate Finance, Recession, World News, Your Real Estate Life

11/29/23 MARKET WRAP UP

UMBS 6.0 100.55 (+22bps)
10yr yield 4.26

Fed futures showing that markets now expect the first Fed rate cut to happen in May, and belief building that it could be sooner. Next week’s labor data could fuel that fire, and December still looks like it will bring the lowest rates of the year. Shorter term, tomorrow brings PCE inflation data, and we could see another strong rally if markets like the data. Float ’em.

Rate sheets will be better than yesterday, reflecting a nice improvement for bonds both yesterday and today. Reprice risk is low, the 10yr Treasury yield continues to fall and mortgage bonds continue to improve. Even this morning’s strong revised GDP numbers couldn’t shake things up. The outlook remains good for rates, and could get better in December. Markets now 100% expect the Fed is done hiking rates, as well as central banks around the world. The question now is how soon until we see Fed rate cuts, and as speculation grows that those will have to come sooner, mortgage rates will improve.

Billionaire investor Bill Ackman is making headlines again, this time betting the Fed will have to cut interest rates sooner than the June expectations. Ackman thinks it could happen in Q1 (basically that means the March meeting) because the economy is not doing as well as would seem. He’s not the only one that thinks the economic spit will hit the fan soon, and December labor and economic data may make some more believers out there (which would help push rates lower).

Short and sweet today my friends –
Tomorrow we get the PCE inflation data, and that could push rates to “new” lows… I’d float everything and see where we end up tomorrow. Loans with more time definitely want to wait until later in December to lock. Some LOs out there are shell shocked and pulling the lock trigger way too quickly, and it’s costing their clients money and could cost them a loan.

Technicals:
The UMBS 6.0 coupon is at 100.37, +5bps on teh day and about +60bps from when I wrote yesterday’s commentary. Mortgage bonds will be testing the 200-day moving average at 100.36, which could be a temporary resistance level but won’t hold up if we get favorable data next week.
The 10yr Treasury yield at 4.31, versus yesterday’s 4.41. The 10yr busted through the 4.36 100-day moving average resistance level like it was paper mache. Get ready to hold on, December could be very good for the 10yr yield which would be very good for rates.