October 3, 2023 – Rate Commentary

• October 3, 2023
• realestatelife
• Business & Markets, Fed, Interest Rates, Politics & Economy, Rates, Real Estate, Real Estate Finance, Recession, World News, Your Real Estate Life

Rates continuing to creep higher (as expected) with no clear end in sight. I can’t make this any clearer than I have recently – give up all hope of rates falling from here. Reprice risk on the day is moderate, although bonds have improved from the worst levels, we could see them turn tail and lose ground again… and lenders are in no mood to hold steady these days. The JOLTS (job openings and labor turnover survey) data comes out at 10am, and could push bonds back to even worse just as most pricing is coming out.

When reading the headlines, it is more and more obvious that no one really knows what the heck is going on. Rather than quote financial jargon filled sentences from Bloomberg and such, let me summarize it for you… they are all scratching their heads and saying how bonds SHOULD be doing this, and how the economy SHOULD be doing that… all while none of it plays out that way. Remember, we are supposed to be neck deep in recession ’bout now, with rates falling and the Fed cutting. Instead, all I hear is nitpicking every inflation and economic report looking for the smallest signs of weakness. The bottom line here is that despite all of the talk, rates are still going UP and not DOWN.

Lock. All of them. I don’t see any reason at all to be floating these days, unless the loan is closing so far out that you can’t lock it. Even if we get any kind of underperformance in labor data this week, we will only see a blip of improvement. Rates are going to be higher in a month than what we see today. I was wrong when I said we should cap out back around the highs we saw in August… rates are not ready to stop rising yet. The only “good” news is that we aren’t likely to see rates move past the 8’s… but man, two years ago this time we were talking about how rates were going “up” into the 3’s…

Technicals:
The UMBS 6.0 coupon is at 97.89, -20bps on the day.
The 10yr Treasury yield at 4.72, and although it may take awhile, it is no longer absurd to think about a 10yr yield in the 5’s.