Rate sheets today may slip a bit after improving yesterday, and reprice risk on the day is moderate. Rates are trying to find a foothold after being blown out of the water last week, but will likely slip a bit today and could get slightly worse heading into next week. Most of the damage is already done, after the huge pivot we saw in markets after last week's jobs data, but rates may still slip just a bit more after getting no help this week from either consumer or wholesale inflation data. Most of the Fed members out speaking this week were unfazed by the inflation data, as the focus of the Fed now is almost all on the labor market. That's why we aren't likely to see any real improvement in rates possible until the next big labor report November 1st.

A quick recap and recalibration...

Before the jobs report on October 4th, I was forecasting clear sailing for rates because markets were firmly speculating more rate cuts from the Fed, with at least one more half point cut by the end of the year. Traders totally rolled over and gave up on that after the staggering strength of the BLS jobs report and the drop in unemployment, and we saw mortgage rates jump an average of .375 across the board. This week rates have struggled not to move worse and have for the most part held steady, but don't look stable yet.

The big takeaway here is that we won't see rates fall again until and unless we get some weak economic data and the next jobs report comes in much worse showing the September data was an anomaly. That's tough to bet on, so don't get caught chasing rates, especially for loans that close in October. I'm just as depressed about it as you are, believe me, because until we got hit with that jobs bat we were really looking good.

A quick reminder...

If you have refis that fell apart... keep 'em warm. Rates WILL fall again... but it's going to be weeks from now, not days. Prep the consumers to be ready, and keep watering those seeds so you can harvest later.

As far as purchases... yes rates jumped up, but keep those prospects out looking. Encourage them that rates are still much better (about a point better and in some cases more) than a year ago, and that despite all the talk of home prices dropping, most of them haven't (in most markets this is true).

For loans closing in less than 15 days, consider locking. Today's weakness and the 10yr Treasury yield are pointing to some more slipping as we head into next week. With nothing clear on the calendar to count on for possible improvement, locking for protection here hurts but makes sense.

For loans closing in 15-30 days, cautiously float. Locking a loan closing in October is not a bad idea, even if it does make you throw up in your mouth a little bit. Although I do think we are close to capped out for rates for now, there isn't any proof that we've hit the ceiling yet. That said, for loans willing to take some risk, we do have room for at least some improvement in rates and pricing as bonds remain oversold.

For loans closing in 30+ days, cautiously float. Loans that close much further out in the future don't appear to have much to worry about, at the moment. Rates WILL move lower again, but it won't be until we get some signs of a weakening economy and labor market. Loans with time can wait to see what the next round of reports say, as well as the next Fed meeting.

Technicals:

The UMBS 5.5 coupon is at 100.27, -9bps.

The 10yr Treasury yield is at 4.09 this morning after closing right below technical support at 4.07 yesterday. If we don't see it improve by the end of the day, we don't have more support until a fibonacci level at 4.13 and the 200-day moving average at 4.17.