July 31, 2023 – Rate Commentary

• July 31, 2023
• realestate
• Business & Markets, Fed, Interest Rates, Politics & Economy, Rates, Real Estate, Real Estate Finance, Recession, World News, Your Real Estate Life

Wrap up
10yr yield: 3.96

Bonds off their best levels of the day, if you saw one of the handful of reprices better today you may see them reprices worse again before the day is over… otherwise not enough movement for most lenders to bother (but some may). Unless holding out for jobs data or CPI data in a couple weeks, not a bad idea to consider locking some of the vulnerable loans for protection.

Morning

Pricing this morning likely to be similar to Friday’s rate sheets and slightly better for some, as bonds open the day a bit weaker in overnight trading but show signs of recovering. Reprice risk on the day is moderate, although the economic calendar is pretty empty for the day. The outlook hasn’t changed much, right now markets pricing in a small chance that the Fed will raise rates again in September, and a bit larger likelihood they will raise ’em in November. We have lots of time and economic data to come though, and depending on how that data comes in will depend on how the outlook changes.

Mortgage bonds ended the day on Fridayat the best levels of the day, up almost +40bps. That helped ease some of the pain of Thursday’s losses, and helped rates rebound. It is important to realize that rates were always still within the range we are likely to continue to see for the foreseeable future, with con/con rates running in the high 6s to low 7s. However, bonds have lost ground from the best levels see after the June CPI inflation data came out, and there is the possibility that they could get worse this week when the jobs data comes out.

For loans closing in less than 15 days, cautiously float with an eye on locking. No need to panic lock, cautiously float to start the day today and see if we get a rebound, but look to pick your spots and lock these loans unless it looks like the jobs data will help us. We aren’t likely to see rates drop much from here unless we get super weak jobs data on Friday or great CPI data in a couple of weeks, which would be too late for these loans.

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 (or worsen, more of a possibility for the jobs data). 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 rates are near the top of the range, and 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 99.22, -6bps on the day but still quite a bit better than this time on Friday.

The 10yr Treasury yield at 3.98, which is the same as Friday.