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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 likely the same as yesterday’s AM rate sheets but worse than any reprices better (if you are one of the handful who saw one). Reprice risk on the day is moderate, although there isn’t any relevant economic data coming out today we do have a bunch of Fed members out speaking, including the big dawg Fed Chair Jerome Powell himself, as well as other central bank officials from across the pond. Also this afternoon we will see the 10yr Treasury auction, which will be scrutinized for investor appetite. So far so good on that front though, I’m not thinking we will have trouble with it, but we want to keep an eye on it regardless. The outlook remains the same though, it’s tough to see rates fall much lower… but the speculation about inflation is good right now and a good report from the CPI inflation data next week could help us see new lows. Even still, I think there is a lot of risk to floating, and would only consider floating loans with extreme risk tolerance or loans closing in 30+ days… at least for now. That could change, but only if we see signs that we could see rates move lower in the next 30 days.
Markets are speculating that the Fed is done raising rates, despite the Fed’s forecast from September. Traders feel like the labor market is showing signs of softening, and the Fed’s real-time model is showing a sharp slowdown in the economy to 1.45% in annualised growth from 4.9% in Q3. Some Fed members are out there talking about how another hike is likely needed, yet others are out there saying it’s time to wait and see. What really matters to mortgage rates though is when markets think the Fed will have to start cutting. Right now it looks like the see-saw starts to tilt to lower rates in May, according to markets, but just barely. June looks like a more likely candidate. If that timeline shortens, that will open the door for lower rates to come.
For loans closing in less than 15 days, lock. Like I say above, unless a loan that is closing in the next two weeks has time to get the CPI data on 11/14, and the risk tolerance to float into it, might as well lock. If we get a favorable CPI report that bonds really like, we could improve though. How much is a huge question, depending on market sentiment and if the data surprises to the downside (meaning lower inflation than expected).
For loans closing in 15-30 days, lock. Similar to above, it isn’t worth the risk to float… not quite yet. That COULD change though. For those that DO want to risk it, next week’s CPI data could help, as well as the Thanksgiving holiday. But the reality is that it isn’t likely we see rates drop much from here.
For loans closing in 30+ days, cautiously float. These loans have the least to lose, because based on the current outlook we are likely to see rates hit these levels again even if they creep higher. It’s not a bad idea to lock them if you like the pricing, but for those that can’t lock or want to wait a bit there is less risk than loans closing near term.
Technicals:
The UMBS 6.0 coupon is at 98.92, -8bps on the day but a little better than yesterday. Mortgage bonds are treading water though, and haven’t really moved up or down much since last Friday capped an epic week in rates.
The 10yr Treasury yield at 4.56, and while this is a great sign that it is lower than yesterday, I’m concerned that it could hit some tough technical resistance at the 50-day moving average at 4.57 that could halt further improvement without something to push it through (like next week’s CPI data).
