FRM Update

April 4, 2022

Current Yield Spreads

The Treasury curve finished last week inverted, as the yield on 2-year Treasuries increased 19 bps to 2.46%, surpassing the yield of 2.38% on 10-year Treasurys. The MBS sector put in a strong performance as yield spreads tightened sharply. Nominal yield spreads on 15-year MBS current coupon production tightened 9 bps to 27 bps, while yield spreads on 30-year MBS to Treasurys with similar duration tightened by 4 bps to 99 bps.

Trading Activity

The summary below reflects customer purchase activity from the previous week. Activity was once again focused on UMBS 20-year 2.5s and 3.0s. We also observed several large trades in seasoned GN 30-year 3.5s.  Activity was modest in the 10- and 15-year sectors where spreads remain tight compared to historical levels and 20- and 30-year product.

Mortgage Rates & Applications

Mortgage rates shot higher last week as the 15-year increased 19 bps to 4.07% and the 30-year rate increased 35 bps to 4.91%. The benchmark 30-year interest rate has increased 164 bps this year alone and is at its highest level since October 2018.  Mortgage applications fell 6.8% for the week ending March 25 as mortgage rates continued to climb higher. Surprisingly, purchase applications rose 0.6% during the week but refi applications plunged another 14.9%. Refis are approximately 60% lower year-over-year.

Michael S. Erhardt, CPA

Senior Vice President, Investment Strategies

Vining Sparks

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