Treasuries are giving back a little ground this morning. The 10 year Treasury is quoted at a 5.275% yield, down about 3.2 basis points, after yesterday's session left mortgage rates at another recent high. The move is small, and with the 10 year still sitting near its highest level in a year, it is a pause rather than a reversal.

Mortgage backed securities are modestly better. The UMBS 6.0 coupon is priced at 98.00, up 0.16 so far this morning. The 2s/10s curve is steep at 49.0 basis points, with the 2 year near 4.79% and longer maturities still carrying the pressure. That steepness is what has kept mortgage pricing from improving even on days when Treasuries catch a bid.

On the calendar, the August trade deficit came in wider than expected at 105.6 billion dollars versus a forecast of 102.0 billion. That is not a rate moving number by itself. The main scheduled event today is the 3 year Treasury auction at 1:00 PM ET, where weak demand could push yields back up. Tomorrow afternoon brings the Fed meeting minutes, which will be read closely for any hint about the timing of the next move, and the next major inflation test is CPI on October 14.

Today's News and Market Impact

The story driving rates today is a market catching its breath, not changing direction. Yields eased slightly ahead of tomorrow's Fed minutes, but investors remain focused on inflation and on the possibility that the Fed's next step is higher, not lower. Yesterday's selling pushed the 10 year toward its highs, and the small improvement this morning has not erased that damage.

For a borrower, the takeaway is that a few basis points of relief does not make a trend. The auction this afternoon and the minutes tomorrow are both capable of reversing this morning's gains. Until yields show a real peak, the risk is skewed toward higher pricing, not lower.

Benchmarks

10-Year Treasury: 5.275% yield ▼ 3.2 bps (price 94.998)

UMBS 6.0 Coupon: 98.00 ▲ 0.16

2s/10s Spread: 49.0 bps

Lock or Float?

15 Days: LOCK. Closing is close and the 10 year is near a one year high. This morning's small bounce is not a reason to gamble, so protect the pricing you have.

30 Days: LOCK. The 3 year auction, Fed minutes, CPI on October 14, and the October 28 Fed meeting all land inside this window. Lock rather than hope for a reversal.

30-45 Days: LOCK. There is no confirmed bottom in yields. A modest morning bounce has not been enough to turn the market, so lock until a genuine reversal shows up.

45+ Days: LOCK. Even for longer closings, floating means betting on a bottom that has not formed. Lock until yields show a confirmed reversal, not just one good morning.

Drew Fisher, NMLS #44061 | Pure Rate Mortgage LLC, NMLS #2578474. This commentary is for educational purposes and is not a commitment to lend or a guarantee of any rate or term.

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