FRM Update

January 24, 2022

Current Yield Spreads

The mortgage passthrough market found support last week as yield spreads tightened slightly.  Nominal yield spreads on 15-year MBS tightened 5 bps to 16 bps, while yield spreads on 30-year MBS to Treasurys with similar duration tightened 5 bps to 61 bps.

Trading Activity

The summary below reflects customer purchase activity from the previous week. The most prevalent trade was in UMBS 20-year 2.5s, followed by 30-year 3.5s (GNMA).  Activity continues to be modest in 10- and 15-year passthroughs as valuations remain rich. There was also a pick-up in demand for 15- and 30-year Jumbo 2.0s and 2.5s.

Mortgage Rates & Applications

Mortgage interest rates continued to climb higher last week, reaching levels last seen in March 2020. The 30-year rate increased 16 bps to 3.68% and the 15-year rose 17 bps to 3.01%.  The 30-year rate has increased 49 bps during the past month. Mortgage applications for the week ending January 14 rose 2.3% as purchase applications jumped 7.9% but refi applications declined 3.1%. Refi applications are down 49% compared to one year ago.

Michael S. Erhardt, CPA

Senior Vice President, Investment Strategies

Vining Sparks

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