September 28, 2023 – Rate Commentary

• September 28, 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 6.0: 98.70 (+30bps)
10yr yield: 4.58

Bonds had a strong recovery today on some dovish Fed member comments and weak consumer spending data, mainly a correction from being over sold. This is not a reversal, and if you saw reprices better today you should take them, it’s not likely gains continue much tomorrow. After repricesrates are better than yesterday but still up from Tuesday. Lock for protection.

Rates continuing to move higher, as I have been warning over and over would be the case, and reprice risk today is moderate. We’ve seen reprices worse the last couple of days, and could see more today despite bonds already being down significantly to start the day. Rates are likely to continue higher from here before falling again, and when they do fall it is looking like we will find ourselves in a higher range than before the last Fed meeting. I warned early in the week that I thought a 7.75% con/con base rate was likely by the weekend, and it looks like I (unfortunately) am going to be right. This fever isn’t ready to break yet friends, so I’m still in a locking bias until we are closer to seeing the worst of this. Let’s keep the false optimism in check, a broken umbrella isn’t much solace in a tropical storm.

What about the government shutdown, isn’t that supposed to be helping bonds? Aren’t we supposed to be seeing a flight to safety? Yeah, and um no. I mentioned the other day that unlike past scenarios where we’ve seen a shutdown, this one wasn’t going to help rates much. Any help we do get will simply be to slow down this f-rate train (yes, dad pun) and isn’t going to drive rates lower. What it WILL do is delay the publication of key economic data next week… JOLTS jobs data, non farm payroll and wage data. So while a shutdown is looking more and more likely, don’t look to it for any help.

Lock ’em. Yes, all of them that close in the next 60 days. The only loans that really have their hands tied here are loans that close much farther out. The only potential good news we have there is that we know rates are cyclical and we may be pulling back from the worst of it by the time those loans are near closing and ready to lock. The rest of the loans should be locked.

Technicals:

The UMBS 6.0 coupon is at 98.14, -27bps on the day and a huge drop from yesterday around this time.

The 10yr Treasury yield at 4.66, and 5% is looking more and more possible before the end of 2023.