April 17, 2017
Fixed Rate Mortgage Market Update
For Monday through Wednesday, trading activity improved across the MBS and CMO sectors last week, fading Thursday with the early close and Friday holiday. Prices moved sharply higher with the overall bond market rally. Yield spreads in 15yr and 30yr fixed MBS widened 1 to 3bps to both Treasuries and swaps last week. 30yr mortgage rates fell another 2bps last week and have declined 24bps YTD and are currently at their lowest levels of 2017. Mortgage applications reversed the recent trend and rose for the first time in almost a month, increasing 1.5% from higher purchase application activity. April MBS prepayment speeds are expected to slow down due to reduction in day count, which should more than offset the seasonal increase in home sales.
- Mortgage yield spreads widened last week:
- 15yr and 30yr MBS spreads ended the week 1 to 3bps wider to Treasuries and swaps
CMO activity seemed to just start to get going last week in time to be curtailed by the holiday. Finding specific structures to match inquiries remains a challenge as issuance volume remains light. Bid list inquiries and swap activity picked up some as prices rose. Depositories still seemed focused on stable structures with 4- to 5.5-year average lives, especially VADM type structures.
Rates and Refis
- Mortgage rates declined again for the fourth consecutive week
- 15yr mortgage rates fell 2bps to 3.34%
- 30yr mortgage rates fell 2bps to 4.08%
- 15-year and 30-year fixed mortgage rates have now fallen 21bps and 24bps year-to-date; however, mortgage rates are up 46bps and 51bps post-election, respectively.
- Mortgage applications reversed the recent trend and rose for the first time in almost a month. For the week ending April 7, mortgage applications rose 1.5% on a 2.9% increase in purchase apps and unchanged refinance apps. Looking at the 4-week moving averages, purchase apps have settled into a range that is improved from the low levels of 2013 and 2014, but have struggled to push higher over the past year. Applications for refinance continue to remain very low and were unchanged from the prior week.
Dan Stimpson, CPA
Senior Vice President