October 10, 2023 – Rate Commentary

• October 10, 2023
• realestatelife
• Business & Markets, Fed, Interest Rates, Politics & Economy, Rates, Real Estate, Real Estate Finance, Recession, World News, Your Real Estate Life

Rate sheets will rebound this morning from Friday’s brutal reaction to the jobs data, unfortunately rates being helped by the conflict/war in the Gaza strip/Israel. Reprice risk today is low, it is unlikely we see bonds give back the current gains. We might have seen a shift in sentiment this week anyway, had there not been the event in the Middle East, with inflation data coming in and markets being near the end of the worsening cycle. However, with the additional factor added in, it is now much more likely we have seen rates crest for awhile, and they could start to fall. It is unlikely they will fall much, at least unlikely for the moment, but we could see at least some movement lower.

We want to continue to cautiously float all loans. After being in a locking stance for quite awhile for protection, I switched to floating Friday after it became a terrible idea to lock in those reactionary rates. Now we are faced with a shift in sentiment by markets, who are now pricing in a much higher probability that the Fed is done raising rates. Fed officials have been sharing the message that the recent run up in bond yields has done the work for them, and that another hike may not be necessary. Added to this is the uncertainty surrounding the Middle East conflict, and that the Fed is less likely to raise rates without knowing how it will affect the economy. Like I said above, it doesn’t yet look like rates will fall much, but that could change.

Technicals:

The UMBS 6.0 coupon is at 98.09, which is a huge difference from the 97.31 they were at on Friday morning when the jobs data came out. Mortgage bonds are up +42bps on the day, after also recovering quite a bit on Friday.

The 10yr Treasury yield at 4.70, also much lower than the 4.84 we saw on Friday.