Originator Update

10 Year Treasury: 1.58%

5 Session Range: 1.57% to 1.6775%

Lock Strategy:

Floating to lock on any improvement in short term [this week]

Floating to lock on any improvement in long/med term

StopLoss if bonds break 1.67 yield; the market has been trading sideways in a range of 1.5% to 1.67% since Mid-January, and has tested the ceiling several times

→ In this market, there isn’t much spread to be gained in looking for a large fluctuation in price, and with current volumes turnaround should be quick, allowing you to close before any major swings. With the amount of negative news that has come out internationally, and the positive news with the data around the US Economy, there appears to be very little risk of the market breaking to the downside and a flight bonds, which in turn would cause rates to deteriorate. Global yields continue to be around, or under, 0% meaning that even the [meager] returns on US Bonds are better than the alternatives.  

Potential Market Movers: 

Coronavirus intensifies - There is a chance that it is severely under reported in China, and/or the virus becomes more deadly/less treatable. With the recent progress in trade deals, this could hinder the global economy and present an even more limited upside for growth. This would impact rates positively, but could cause a much more complicated economic reaction.

CPI Inflation - This report is out Thursday 2.13 and if there is a huge uptick in inflation, this could cause rates to deteriorate as investors would likely move toward equities, causing bond yields to rise

Other Notes: 

Inverted Yield Curve[?] - The yield curve is starting to look ‘inverted’ again, meaning that short term securities have a higher yield than long term bonds. This is likely due to international conditions as our securities have much higher returns than most countries

Delinquencies & Foreclosures - Foreclosures are at 0.4% and about 40% homes are owned ‘Free and Clear’. 1.3% is the rate of serious delinquencies, and short term delinquencies are up to 3.8%. Keep an eye on that trend to make sure that it does not accelerate,. Overall very healthy numbers here

Many believed, including myself, that last week was the time to lock ahead of the jobs report. The data came out better than expected, but bond yields rose and rates sank. Why? Well actually the data may have been 'too good'. With many expecting the Fed to continue Open Market operations and to also cut rates soon, the data could be weakening the case for both, causing a temporary reaction where both bonds and stocks are up. We are in a range where things are going very sideways waiting on the next bit of digestible news.

'Market' has priced in a 100% chance of another rate cut by September 2020

Loan Originators out there: What are you advising right now?