September 1, 2023 – Rate Commentary

• September 1, 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 likely to be in line with yesterday, as both those that locked and those that floated win this morning… since there is basically no change. Reprice risk on the day is low, we may see bonds drift higher as traders park money in bonds for what is historically the last hurrah of summer (at least on Wall St and in the Northeast)… Labor Day Weekend. I’ll dig a bit deeper into the jobs data next, but the bottom line is that we aren’t seeing any big sell off or any big rally. I feel like this improvement trend is on borrowed time, and that we will see rates creep higher again next week. This week’s lower rates were a gift, let’s not waste them – my advice is to lock most of what you can and not to get greedy. As Blood, Sweat, and Tears said, “What goes up must come down Spinning Wheel got to go around.”

Jobs data this morning was a mix, with more jobs created than expected but unemployment ticking up higher. Overall the signs are taken that the labor market is cooling a bit, but not enough to spark talk of recession. There were 187,000 new jobs versus the 170,000 forecast, and the June and July numbers were revised down together 110,000. Unemployment was up from 3.5% to 3.8%, and earnings rose 4.3% from a year earlier.

Lock’em… here’s why…

Next week there is very little in the way of economic data, and the next big report is the September 13th CPI inflation data. 

Loans closing in less than 15 days should lock because they are more likely to see a pullback next week and lose ground, and can’t wait until that inflation data were to come out even if they wanted to.

Loans closing in 15-30 days should lock because unless the CPI inflation data blows markets out of the water and really wows us, it isn’t likely to bring rates any better than we see today.

Loans closing in 30+ days have the least urgency to lock, because we may indeed see these rates or a bit better. But uncertainty abounds, and we could find ourselves in a position with rates rising again and look back on today longingly.

I feel like this rate rally has lost steam, and I think it’s a good time to take the money and run. Rates are much more likely to move higher again from here rather than move much lower, in my humble opinion.

Technicals:

The UMBS 6.0 coupon is at 100.29, +2bps but losing ground.

The 10yr Treasury yield at 4.11, but creeping higher.