September 5, 2023 -Rate Commentary

• September 5, 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: 99.77 (-42bps)
10yr yield: 4.27

Lots of reprices worse pouring in this afternoon, hopefully you were able to lock with our first alert. Rates are back on the rise, and we have a lot more room to see them move higher. I wouldn’t get too hopeful of seeing them start to move lower again without help from next week’s CPI data, and even that is a lot to hope for right now. Advice remains to lock ’em.

Rates this morning likely to creep a bit higher, and reprice risk on the day is moderate. Last week’s rally now looks like a heavy smoker in the second half of the NYC marathon, and on Friday I warned you that it was a good time to lock. I stand by that advice today, as bonds are already losing ground and it looks like rates are done improving and are already starting to slide. This week has a couple of minor economic data reports and the Fed’s Beige Book, nothing that is likely to send bonds rallying. Last week’s rally will soon be a memory, with all eyes on next week’s CPI inflation data as the next chance to hope for improvement. It was like the last romance of summer my friends, it was fun while it lasted but now it’s time to get back to reality.
 

Lock’em… here’s why…

Loans closing in less than 15 days should lock, taking the gains we picked up from last week before they disappear.

 Loans closing in 15-30 days should lock because unless the CPI inflation data blows markets out of the water and really wows us, it isn’t likely to bring rates any better than we see today.

 Loans closing in 30+ days have the least urgency to lock (but should still lock),with both the CPI inflation data and the Fed meeting happening within this window… and either (or both) could arguably end up being good for rates. But without clearly knowing where things will go from here, locking is probably a good call unless the loan is very risk tolerant and wants to gamble.

I feel like this rate rally has lost steam, and I think it’s a good time to take the money and run. Rates are much more likely to move higher again from here rather than move much lower, in my humble opinion.

 Technicals:

The UMBS 6.0 coupon is at 99.94, substantially worse than Friday when most pricing was coming out.

The 10yr Treasury yield at 4.23, jumping higher over the holiday and quite a bit higher than Friday’s 4.11.