February 21, 2024 – Rate Commentary

• February 21, 2024
• realestate
• Business & Markets, Fed, Interest Rates, Politics & Economy, Rates, Real Estate, Real Estate Finance, Recession, World News, Your Real Estate Life

Rate sheets this morning may be just a little bit better than yesterday, but nothing to get too excited about. Reprice risk on the day is low, markets seem calm and have found a range for bonds to tread water. The Fed’s meeting minutes from the last meeting come out at 2pm ET today, and the best we could hope for is that the minutes suggest how confident officials are about the need to cut rates in 2024 and that they are likely to discount the inflation and jobs data we have gotten over the last couple of weeks. That’s the only way we see any real reaction to the minutes, otherwise they will quietly slip by. The outlook for now is for rates to stay near the levels we see them at now, at least until March 8th’s jobs data.

REPRINT:

The story remains the same, the fate of mortgage rates are in the Fed’s hands. Rates dropped at the end of 2023 from their peak because markets had figured the Fed had pivoted and was done raising rates. Rates continued to improve as traders got a bit ahead of themselves and started pricing in Fed rate cuts to start as early as March. Earlier this month it was the much stronger than expected jobs data that started the dominoes falling, and last week’s inflation data was the straw that broke the camel’s back and sent rates higher. Although we are still much lower than October 2023’s peak in rates, we are seeing rates about .5 to .75% higher than in December.

Since it is unlikely we are going to see this sentiment shift any time soon, it makes sense to lock most loans right now. We could continue to see rates move higher from here as markets give up on Fed rate cuts.

For loans closing in less than 15 days, start the day cautiously floating but the overall bias remains to lock for protection. We could see a small pickup in rate sheets if bonds like the Fed minutes, although it’s still a low probability.

For loans closing in 15-30 days, cautiously float, at least until we see signs that rates may move higher once again. Loans that don’t close until the second week of March may want to start considering floating into the March 8th jobs data looking for improvement. There is a lot of risk to this though, so risk averse loans should continue to consider locking.

For loans closing in 30+ days, cautiously float for now. Loans that don’t close until later in March or after could see help from the March 8th labor report as well as the next CPI inflation report and the March 20th Fed meeting/press conference. Since bonds are treading water, let’s try cautiously floating for now.

Technicals:

The UMBS 5.5 coupon is at 98.89, improving from yesterday and now with some room above the 98.66 200-day moving average support level.

The 10yr Treasury yield is at 4.26, almost flat from yesterday, showing that bonds have found, at least temporarily, an equalibrium.