July 27, 2023 – Rate Commentary

• July 27, 2023
• 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 should be a bit better than yesterday, and reprice risk on the day is low. Strong economic data this morning put a damper on things… jobless claims coming in lower than expected pointing to a strong labor market, 2nd qtr GDP data showing the economy is nowhere near a recession, and durable goods orders jumping. The outlook near term not too bad for rates, but the door is definitely open over the next few weeks for rates to creep higher again if we see strong jobs data and inflation doesn’t keep dropping.

The Fed surprisingly raised rates yesterday… just kidding, it was no surprise at all. What was actually surprising was the annoyed tone that Fed Chair Jerome Powell had through is press conference as he bobbed-and-weaved through reporters questions better than Barry Sanders in his prime. Powell refused to be tied down, or to commit to any future actions. That helped rates improve a bit since he didn’t scare anyone with talk of a definite rate hike to come, but not by too much.

For loans closing in less than 15 days, cautiously float. As long as we don’t see bonds lose ground today we can float, and see how things go. We would have seen pricing improve a lot more if we hadn’t seen such strong economic data this morning. For these loans, you want to pick your spot and take your shot… when you see a day with good pricing, just take it. We aren’t likely to see rates improve much near term. If we see trouble today that points to reprices worse, you may want to just lock before those reprices come.

For loans closing in 15-30 days, cautiously float. Same as above, pick your spot and take your shot… but consider that we have jobs data August 4th, and CPI data August 10th that could see rates improve. Floating depends on the borrower’s risk tolerance.

For loans closing in 30+ days, cautiously float. It’s just too foggy to know where rates will be in a month, but as long as we don’t see a lot of risk of higher rates it makes sense to float and see how some of this data plays out over the next few weeks.

Technicals:

The UMBS 5.5 coupon (MBS or mortgage backed securities) at 99.39, -13bps on the day, putting us smack back where we were yesterday about this time. The trend for bonds not looking good though, after a lot of improvement we’ve seen a slow but steady worsening.

The 10yr Treasury yield at 3.93, not the direction we want to see.