December 18, 2023 – Rate Commentary

• December 18, 2023
• realestate
• Business & Markets, Fed, Interest Rates, Politics & Economy, Rates, Real Estate, Real Estate Finance, Recession, World News, Your Real Estate Life

Rate sheets today may be a bit worse than Friday but shouldn’t be much… however, we are seeing definite signs that this rally has stalled. Reprice risk on the day is low, nothing on the economic calendar or in the headlines that should shake things up. Markets are shrugging off cautionary comments made by Fed members that rate cuts are not coming as quickly as markets are pricing in. It is unlikely we see rates improve significantly from here through the end of the year, and as traders take off for the holidays we could see some volatility caused by reduced trading volumes. The suggestion remains to lock most loans closing in the next month, and cautiously float the rest.

From Bloomberg: This weekend, Atlanta Fed President Raphael Bostic told Reuters that he doesn’t see cuts starting until the third quarter, and Chicago Fed President Austan Goolsbee said it’s an overstatement to consider rate cuts until officials are convinced inflation is on a path lower to its target. New York Fed President John Williams kicked off the pushback on Friday by saying it’s too early to begin thinking about lowering borrowing costs.

Loans closing in less than 15 days should consider locking, especially if mortgage bonds worsen through the day. Like I say all the time, I don’t have a crystal ball, but the odds are now in favor of taking these great rates and running.

Loans closing in 15-30 days should consider locking. We aren’t likely to see rates move much lower from here at least until January, and we’ll need help from the jobs data and unemployment numbers as well as the CPI inflation data that comes after. That’s too far away for these loans to benefit, and without any clear reason to expect further improvement after an epic run the last couple of days, I’m locking and not looking back.

Loans closing in 30+ days should cautiously float. These loans don’t need to worry about locking yet, because even if rates creep up a bit they will likely fall again in January.

Technicals:
The UMBS 5.5 coupon is 100.06, -17bps and lower than Friday.
The 10yr Treasury yield at 3.96, and I am betting we will see it break back above 4% by the end of the week.