FRM Update

April 2, 2018

MBS yield spreads versus Treasuries widened as Treasury yields fell across the curve beyond two years.  The Treasury curve hits its flattest levels of the cycle between 2/5s, 2/10s, and 2/30s. Mortgage rates fell 6bps last week reversing the trend higher this year, while mortgage applications rose as both purchase and refinance applications increased.  The S&P CoreLogic 20‐City Composite Home Price Index increased unexpectedly at the fastest pace since July 2014 (6.40% YoY) and pending home sales rose a stronger-than-expected 3.1% MoM in February.




CMO yield spreads versus the Treasury curve were unchanged on shorter structures and widened on longer structures.  With the recent market movements, CMO yields of 3% or higher became attainable for typical bank-type structures.  Significant investor activity is focused on those structures that offer 3% yields or higher with weighted average lives typically ranging from two to five years (base case) and up to seven years (+300bps).  Investor activity has primarily been focused in front sequential and VADM structures with coupons typically ranging from 4% to 4.5%, with the majority of the activity recently focused on higher coupon front sequential structures.




Mortgage Rates and Refinance Activity








Dan Stimpson, CPA

Senior Vice President

Vining Sparks

The information included herein has been obtained from sources deemed reliable, but it is not in any way guaranteed, and it, together with any opinions expressed, is subject to change at any time. Any and all details offered in this publication are preliminary and are therefore subject to change at any time. This has been prepared for general information purposes only and does not consider the specific investment objectives, financial situation and particular needs of any individual or institution. This information is, by its very nature, incomplete and specifically lacks information critical to making final investment decisions. Investors should seek financial advice as to the appropriateness of investing in any securities or investment strategies mentioned or recommended. The accuracy of the financial projections is dependent on the occurrence of future events which cannot be assured; therefore, the actual results achieved during the projection period may vary from the projections. The firm may have positions, long or short, in any or all securities mentioned. Member FINRA/SIPC.
Copyright © 2023
This is a publication of Vining-Sparks IBG, LLC
775 Ridge Lake Blvd., Memphis, TN 38120