October 26, 2023 – Rate Commentary

• October 26, 2023
• realestatelife
• Business & Markets, Fed, Interest Rates, Politics & Economy, Rates, Real Estate, Real Estate Finance, Recession, World News, Your Real Estate Life

WRAP UP
UMBS 6.5: 99.23 (+73bps)
10yr yield 4.85

Another day of huge gains for bonds with most lenders repricing better, bringing rates back to Tuesday’s levels after seeing them move higher yesterday. Could we keep improving? Will bonds care much about tomorrow AM’s PCE inflation data? Odds are against it, although anything is possible. Rates likely to move higher eventually, but it may not be tomorrow. Go with your gut.

Rate sheets this morning will be worse, reflecting yesterday’s continued losses in bonds. Reprice risk today is moderate, we’ve already seen some volatility due to the strong third quarter GDP readings (bad for bonds and rates) and the European Central Bank leaving interest rates unchanged for the first time in more than a year (good for bonds and rates). Tomorrow morning comes the PCE inflation data, unlikely to have any surprises that would hurt bonds, but nothing seems to play out quite like we expect these days.

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 98.89, +39bps on the day but still worse than when rate sheets came out yesterday.

The 10yr Treasury yield at 4.92, still staying below the magic 5% mark for the time being.