12 Aug Rates Move Up!
Mortgage backs securities took a drastic fall this morning of about 14 bps from yesterday when they were flirting with that ceiling of resistance we have talked about for weeks. The driver of this move lower was the CPI (Consumer Price Index) coming in at .6%, about double what was projected for the month of July. Again, the CPI is a measure of inflation of consumer goods such as transportation food, medical, etc. We have talked about inflation being the enemy of the bond market. This is reflected in mortgage interest rates because as the dollar becomes less valuable, investors demand a higher rate of return. We are now in the lower quarter of the trading channel with a little more room to fall. The safe play is to lock. However, if you are able to closing follow the market, you may be able to catch a bit of a rebound if you float.
The commercial real estate world faces some interesting times as developers consider what should happen with so many vacant office buildings. U.S. Housing and Urban Development Secretary Ben Carson is among a group pushing for commercial buildings in larger cities to be converted into affordable housing developments. This comes at the time of the least affordable housing industry and the largest housing shortage the US has ever seen. It isn’t likely that this transition will happen immediately as most companies are locked into multi-year leases, but it will be interesting to see the shift in commercial as more companies send employees to work from home permanently.
Have a good day!