September 6, 2023 – Rate Commentary

• September 6, 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: 99.59 (-16bps)
10yr yield: 4.30

Stronger than estimated ISM services numbers this AM sent bonds selling, but the Fed’s Beige Book showed slowing growth in the economy for July and August. Rates still likely to creep higher heading into Fed mtg 9/20, with only a surprisingly positive inflation reading next week being something that could send rates lower. Advice remains to lock ahead of rates rising.

Rates this morning continuing to move higher, quite a bit worse than opening rate sheets yesterday. Reprice risk on the day once again is moderate, bonds are losing ground and could continue to do so. The Fed’s Beige Book comes out today at 2pm Eastern. The Beige Book is a summary of the current economic conditions across the 12 Federal Reserve Districts, along with a summary. If it shows more economic strength from the last report, it could contribute to bonds losing more ground this afternoon which would put lenders in a position to reprice worse. This isn’t a big threat, but it’s a possibility to be aware of as the day goes on. Other than that, it’s important to realize that last week’s drop in rates is definitely behind us, and risks favor locking your loans.

Loans closing in less than 15 days should lock, there’s nothing between now and next week’s CPI inflation data to even hint that rates will move lower.
 

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.
 

Technicals:

The UMBS 6.0 coupon is at 99.72, -3bps on the day and about -20bps from the same time yesterday. 

The 10yr Treasury yield at 4.26, continuing higher after hitting 4.11 last Thursday. There isn’t any technical support until 4.34.