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Saturday’s: 9AM 1590 AM/97.9 FM KVTA
Sunday’s: 7AM K-EARTH 101 FM
Listen Live
Saturday’s: 9AM 1590 AM/97.9 FM KVTA
Sunday’s: 7AM K-EARTH 101 FM
Rates will dip even further this morning, helped along by jobs data coming in weaker than expected across the board this morning. Reprice risk on the day is moderate, we’re seeing a very big reaction to the jobs data, capping off a week of bond gains that were sorely needed. We could see bonds fluctuate today, and that could cause lenders to tweak pricing… especially those lenders that like to reprice if a mouse sneezes… but overall I think we should be ok because we are seeing big gains for bonds that most lenders will be more conservative about pricing into rate sheets on a Friday when this rally could be overdone. Continuing to float is risky, read this whole commentary today would be my advice.
TL;DR… we’ve seen rates drop bigtime, take the money and run. Bulls make money, bears make money, pigs get slaughtered. Lock loans closing near term and risk averse, consider locking all loans if pricing is amazing, but there is less risk for loans that don’t close until December or later.
This was a really good jobs report all around… even though it was a miss across the board it was still representative of a solid labor market. Unemployment was 3.9% versus the 3.8% expected, non farm payrolls increased 150,000 versus the 180,000 expected, revisions knocked off about 100k jobs from the prior two months, and hourly earnings slowed to 0.2% gain versus the 0.3% expected (but the previous month was revised up to 0.3%). These numbers basically showed that the labor market is settling in, its in a good place but not a great place, and was the best case scenario we could ask for. If the losses were too big that would send up flags about the economy and labor market, which isn’t really what we want to see big picture. These numbers hit the sweet spot.
I wish I had a crystal ball through this whole thing, but we had to live it to live it if you know what I mean. I warned you early this week that we would be swept up in the wave of sentiment, whichever wave it was. If traders didn’t get the vibe from Powell that they did, if the data today didn’t come in like it did, if the Treasury had announced bigger borrowing numbers than they did… I shudder to think about where rates would be right now. Thankfully enough of the data and the Fed’s fireworks came in our way this week that rates have fallen significantly.
Anyone else nervous, feeling like we’re about to hear a stop in the music and have to scramble to find a chair? We may be looking at the best rates and pricing we’re going to see on this rally… or, we may not. The technicals for mortgage bonds and the 10yr show that we could be at the end of the improvement rope, and we may see a pullback on Monday.
For loans closing in less than 15 days, lock. Floating these loans into Monday is just asking to see the rubber band snap in our faces. We’ve had an epic run this week, know when to hold ’em, and know when to fold ’em.
For loans closing in 15-30 days, cautiously float and consider locking those loans that are risk averse. It is unlikely that the CPI inflation data pushes bonds to improve even further, but it is possible. A lot of these loans should throw in the towel, take the best rates we’ve seen in months and cash in the chips. However, we do have to recognize that sentiment right now is still in the favor of improvement, and after giving back some gains (VERY likely) we may see another mini rally and see rates fall even further. It’s possible, but it’s hella risky. Assess the risk and decide, but is it really worth it?
For loans closing in 30+ days, cautiously float. These loans have the least to lose, because based on the current outlook we are likely to see rates hit these levels again even if they creep higher.
Technicals:
The UMBS 6.5 coupon is at 100.98, +70bps on the day and more than +160bps on the week. This huge move in bonds puts us back to following the 6.0 coupon for next week as the most relevant, and that coupon is at 99.38 for +97bps at the moment (OMG!!) and is up more than +230bps for the week!!!!
The 10yr Treasury yield at 4.51, after ending the day on Halloween (Tuesday) at 4.93. There is concern here though, with resistance around 4.53. There is a good chance we may see pullback on Monday.
