The BLS head is out but the bad numbers aren’t. The latest jobs report missed expectations, coming in at 22k vs 75k exp. Front-end rates are down over 0.10% WoW and 0.40% since the last jobs report on 8/1. Cap costs have decreased meaningfully as a result.
Punchline so you can get to your weekend – the same amount of money that would have purchased 2 years of protection at the end of July buys 3 years of protection across most strikes today.
Here’s generic cap pricing (in % of notional) at the time of writing.
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Here’s what the same structures looked like a week ago.
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And here’s 7/31 ahead of the previous jobs report. Costs are down 30-50%+ since the end of July!
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Idea – if you have an Agency floater with a few years remaining, you may have enough proceeds escrowed to hedge through maturity. If not, but you have an upcoming cap extension, it could still be a good time to push reset on the escrow calc.
Here are some of the big data points between now and the Fed meeting:
- 9/10: PPI Inflation Data
- 9/11: CPI Inflation Data
- 9/16: Retail Sales Report
There’s still plenty of time to get things teed up for a cap purchase between now and then. If you’d like to think through hedging early or see more precise pricing for your loan, please don’t hesitate to reach out.
Give us a call at 704-887-9880, email us at pensfordteam@pensford.com, or respond directly to this.
