November 6, 2023 – Rate Commentary

• November 6, 2023
• realestate
• Business & Markets, Fed, Interest Rates, Politics & Economy, Rates, Real Estate, Real Estate Finance, Recession, World News, Your Real Estate Life

WRAP UP
UMBS 6.0 98.75 (-39bps)
10yr yield 4.65

Rates lost a bit of ground today after last week’s epic performance, but still lower than we were anytime in October. Tomorrow brings a bunch of Fed speakers, but not likely markets are swayed away from the current sentiment that the Fed is done raising rates. May even see bonds recover a bit tomorrow, but no guarantees there.

Rate sheets this morning likely to lose a bit of ground from Friday, as bonds give back some of last week’s gains. Reprice risk on the day is low though, bonds are recovering from bigger losses in overnight trading and there is no big economic data and only one Fed speaker… Fed Governor Lisa Cook talking about financial stability. Sentiment should still be in our favor, although it is doubtful we see rates move lower from here this week. On Friday the advice was to lock up near term closings and risk averse, and although pricing may have slipped a bit this is still a good time to do so. Loans with more time have less to worry about though.

Last week we saw rate sheets fall an average of .500 IN RATE… meaning there may be some tough conversations with borrowers who locked in the middle of October when rates were the highest. Just a warning that you want to be ready for that talk, especially later this week when the media picks up the Freddie Mac survey numbers and the headlines hit.

For loans closing in less than 15 days, lock. I warned on Friday to lock these loans, and that we may see some losses this morning, and so far that’s what’s happened. I still think locking these loans is a good move, because it will be hard to see rates continue to fall from here without some help, and there’s not much on the calendar this week that could help.

For loans closing in 15-30 days, lock. It is unlikely that we see rates fall significantly from here, and these are the best rate sheets we’ve seen in over a month. Although it looks like we aren’t in danger of seeing rates jump from here for the moment, we also aren’t likely to see them improve much. Take the conservative route and lock.

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. It’s not a bad idea to lock them if you like the pricing, but for those that can’t lock or want to wait a bit there is less risk than loans closing near term.

Technicals:

The UMBS 6.0 coupon (yes, we’re back to that one) is at 98.91, -23bps on the day and down about the same from Friday’s commentary. We’ve seen a nice recovery though from the 98.73 open, the worst levels of the day. It is unlikely we see more of a recovery today, although anything is possible.

The 10yr Treasury yield at 4.62, and although that is well below the ugly 5% level we’ve been watching so closely it is also quite a bit higher than the 4.51 we saw on Friday, but not as far above the 4.57 it ended the day on Friday with.