September 8, 2023 – Rate Commentary

• September 8, 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: 99.84 (-5bps)
10yr yield: 4.26

Quiet day, advice remains to lock most loans simply for protection with big rate improvements unlikely.

Rate sheets will be better this morning, reflecting yesterday’s improvement in bonds, but not really anything to get overly excited about. Reprice risk on the day is low, no reason to expect any big moves either way. Although I am still in a locking stance, there is a bit less urgency and you may want to start the day cautiously floating and seeing if we get a little more improvement from bonds. We aren’t likely to see any big moves ahead of next week’s CPI inflation data, and some loans may want to gamble into that data… especially loans that don’t close till October or later.

Next week’s inflation data comes a week before the next Fed meeting, where markets are still betting on a Fed rate hike pause before another hike comes in November at the following meeting. Rates are not likely to fall until talk picks up for the Fed to start CUTTING rates, and that isn’t likely to happen until the second half of 2024. Markets are betting it could start earlier, but markets have been overly optimistic about Fed moves this entire cycle and I think we will see a similar scenario as we head into 2024.

Loans closing in less than 15 days can cautiously float to start but should lock by days end. While it is entirely possible that next week’s inflation data could help bonds with a bit of a mini rally that brings rates back down to last week’s best levels, it’s too much of a gamble in my opinion.

Loans closing in 15-30 days can cautiously float to start but should lock later today because unless the CPI inflation data blows markets out of the water and really wows us, it isn’t likely to bring rates back down much.

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 100.02, +13bps on the day.

The 10yr Treasury yield at 4.23