Rate sheets this morning likely to be just slightly worse than Friday but nothing to really get worried over. Bonds are down a bit on the day due to pressure from bonds in Europe, where yields have moved higher as spending concerns grow that the euro area will have to beef up its military and that will cost money. The outlook for the week is that we will see some normal day-to-day movement, but nothing that is really all that concerning. FROM LAST WEEK BUT WORTH REPEATING: The normal events, triggers, technicals, etc that we use to forecast rates... it's laughable how utterly inaccurate they are right now. As an originator I'd be focused on two things - assessing risk tolerance of the loan/client, and momentum of bonds/rate sheets/market. For example, despite hot consumer and wholesale inflation data this week, traders have shrugged it off and rate sheets only took a hit for a day before starting to recover, and recovered all of the losses in two days. The 10yr Treasury yield shot up from the 4.4s into the 4.6s, then dropped back today into the 4.4s. Traders seem to be listening to the Trump administration's beating drum that they want lower rates. As long as a consumer is willing to gamble a bit, there is little harm in floating and we find ourselves having to be much more reactionary than 'proactive' about rates. All loans can start the day cautiously floating, but should decide when to lock for protection. It's tough to stay in front of the day-to-day volatility, but rates don't seem in danger of moving much higher. Loans closing in the next couple of weeks should be most inclined to lock for protection if not wanting to take on the risk, but loans closing in March and later have less to worry about for now, until the outlook changes. TECHNICALS: The UMBS 6.0 mortgage backed securities coupon is at 100.73, down about -11bps on the day and from when pricing came out on Friday. Mortgage bonds would find technical support from the converging 50 and 25-day moving averages at 100.57, and resistance from the 100-day moving average at 100.91. The 10yr Treasury yield is at 4.52, creeping higher mainly due to pressure from European bonds. |