FRM Update

April 18, 2022

Current Yield Spreads

The Treasury curve steepened again last week as the market digested the latest inflation data.  The 2s/10s slope increased 19 bps to 38 bps as the 2-year Treasury yield declined 6 bps to 2.45% and the 10-year Treasury yield increased 13 bps to 2.83%. Headline and core CPI for March accelerated from 7.9% year-over-year to 8.5% and from 6.4% to 6.5%, both marking the fastest pace since 1981. Core CPI slowed down slightly on a monthly basis, rising 0.3% from February, compared with 0.5% the prior month.

MBS yield spreads were mixed on the week. Nominal yield spreads on 15-year MBS current coupon production widened 14 bps to 45 bps, while yield spreads on 30-year MBS to Treasuries with similar duration tightened 2 bps to 99 bps. Yield spreads have widened significantly this year and are 36% to 50% wider than the average spread levels over the past year.

Trading Activity

The summary below reflects customer purchase activity from the previous week. Activity was led by UMBS 20-year 1.5s and UMBS 15-year 3.0s. There were also a number of trades in 15-year GN Jumbo 2.0s to 3.0s. Lower coupons remain a popular choice for depositories looking to mitigate declining interest rate risk exposure.

Mortgage Rates & Applications

Mortgage rates continued to rise last week as the 15-year increased 22 bps to 4.42% and the 30-year rate increased 19 bps to 5.25%, according to’s weekly survey. The 30-year rate has increased 198 bps this year and is at its highest level since January 2010.  Mortgage applications for the week ending April 8 fell another 1.3% as mortgage rates continued to rise.  Purchase applications did tick up 1.4% but refi applications fell another 4.9%.

Michael S. Erhardt, CPA

Senior Vice President, Investment Strategies

Vining Sparks

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