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UMBS 6.0: 98.91 (+39bps)
10yr yield 4.57
Mortgage bonds continue to improve, setting up tomorrow to have better rates. We could see some volatility when the CPI data comes out at 8:30am ET, but overall it is unlikely we see rates start moving higher again. Unless worried about tomorrow, loans should continue floating.
Rate sheets are likely to be similar to yesterday, with rates falling back from the worst levels seen last week. Reprice risk on the day is low, but it’s important to note that tomorrow will bring the CPI inflation data before rate sheets come out. This morning’s wholesale inflation data came in a bit hotter than expected, with mortgage bonds losing just a bit of ground afterwards. If tomorrow’s consumer inflation data also comes in hotter, we could see some giveback from the recent gains. We will see the minutes from the Fed’s last meeting today, but they aren’t likely to shake things up much. The overall outlook is that we should see rates hold near these levels rather than move much higher.
Loans closing in less than 15 days can still cautiously float, but may want to consider locking ahead of tomorrow’s consumer inflation data if worried about giving back any gains.
Loans closing in 15-30 days can cautiously float, there is not a lot of concern right now that rates will move much higher from here.
Loans closing in 30+ days should also cautiously float, although we may see some pullback tomorrow the bigger picture is still that we will see days with somewhat better rates than we have today.
Technicals:
The UMBS 6.0 coupon is at 98.33, +11bps on the day and better than yesterday when the commentary came out.
The 10yr Treasury yield at 4.59, and this is substantially lower than the 4.70 from yesterday and the 4.84 worst level. As long as the 10yr yield is dropping we don’t have to worry about rates rising.
