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.

 

MBS





CMOs

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

 

 

 

 

Housing

 

 



Dan Stimpson, CPA

Senior Vice President

Vining Sparks

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