October 16, 2023 – Rate Commentary

• October 16, 2023
• realestate
• Fed, Interest Rates, Politics & Economy, Rates, Real Estate, Real Estate Finance, Recession, World News, Your Real Estate Life

WRAP UP
UMBS 6.0: 97.78 (-36bps)
10yr yield 4.70Rates moved higher today, and bonds couldn’t improve. Tomorrow AM we get retail sales data, which could help pricing rebound if it shows any kind of slowdown but will hurt AM rate sheets if it shows more strength. I’d still risk floating, especially loans closing November and later, even if rates creep higher this week we will see them fall back again before too long.

Rate sheets may lose a bit of ground this morning, and reprice risk on the day is low. Mortgage bonds started the day off much worse due to weekend trading, however mounted a strong early comeback and recovered more than half the losses. No need to rush to lock anything yet, better to see how the day plays out. Rates have likely peaked, but will move up and down a bit now. That means we want to lock those loans closing in the shortest window on the good days with the better pricing, while cautiously floating the rest to see what happens as we near the Fed meeting at the end of the month.

The chances of a Fed rate hike in a couple of weeks now seen as very unlikely, with markets pricing in less than a 10% chance of it happening. Still about a 30% chance of a hike in December though, according to the market, but that could diminish. Unless something unforeseen happens to push expectations much higher, we shouldn’t see rates move significantly higher from here.

Loans closing in less than 15 days can cautiously float, and let’s see how the day goes after a bit of a weak start. We could see pricing worsen to start the week, but it is unlikely we don’t see it come back down. Retail sales data comes out tomorrow morning, and if that shows any kind of weakness then pricing is likely to improve. If not though, we could see rates creep a bit higher.

Loans closing in 15-30 days can cautiously float, basically waiting to see what the Fed says at its meeting at the end of the month, when we could see rates improve a bit more then.

Loans closing in 30+ days should also cautiously float, there is little risk to these loans for floating and they can keep options open. That said, I still don’t think we will see rates fall much from here anytime soon, but we could see some days that have better pricing than others.

Technicals:

The UMBS 6.0 coupon is at 97.84, -30bps on the day and down about that much from Friday’s commentary.

The 10yr Treasury yield at 4.71, quite a bit higher than Friday unfortunately.