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Saturday’s: 9AM 1590 AM/97.9 FM KVTA
Sunday’s: 7AM K-EARTH 101 FM
Listen Live
Saturday’s: 9AM 1590 AM/97.9 FM KVTA
Sunday’s: 7AM K-EARTH 101 FM
Rate sheets this morning waving goodbye to yesterday’s gains, as mortgage bonds start out underwater and the 10yr Treasury yield starts reaching for 5% again. Reprice risk on the day is moderate, mortgage bonds are already deep in trouble and we shouldn’t see them get worse, yet it wouldn’t be the first time that bad went to worse. However, there is some hope since we have grown used to seeing bonds take a huge hit in overnight trading, but recover in grand style as domestic markets take over.
So is the worst behind us? Have we finally seen the peak in rates? It’s still too early to tell, although there is some hope that the 5% level for the 10yr will prove to be the final line in the sand. If that happens, mortgage bonds will also find a floor that would help rates stop rising.
Tomorrow AM we get GDP data along with jobless claims, which have been pointing to labor market strength (which is basically supportive of higher mortgage rates). Friday morning comes the PCE inflation data (personal consumption expenditures), which is the Fed’s favorite gauge of inflation. Next week we have the Fed meeting, and Fed Chair Jerome Powell’s press conference. The last couple of Fed meetings have not been good to rates, not sure if this one will break that trend.
Loans closing in less than 15 days may consider starting the day cautiously floating, but once again be ready to lock. It’s really tough to float when we are seeing this much volatility – lock according to risk tolerance, but don’t lock too early unless we see the bottom fall out for bonds. So far this morning though, we’re seeing mortgage bonds recover from the worst levels. Let’s hope that continues.
Loans closing in 15-30 days can cautiously float, but also have to decide when locking makes sense. With the Fed meeting next week, we could see a lot more volatility. Decision to lock or float here depends on how much risk the client is willing to take.
Loans closing in 30+ days should cautiously float. These loans have the most time to live through the ups and downs, but we really don’t know where rates will be in a couple of weeks.
Technicals:
The UMBS 6.5 coupon is at 99.06, -27bps on the day and exactly where we were yesterday when the commentary came out.
The 10yr Treasury yield at 4.89%, and although that is well below the 5% mark it is also much higher than the 4.83 it ended the day at yesterday… moving in the wrong direction.
