FRM Update

April 8, 2019

Yield spreads on current production MBS to Treasuries were mixed last week, with 15-year widening 2 bps to 45 bps, while 30-year tightened 4 bps to 66 bps.  Despite the modest tightening this year, the MBS sector remains appealing as municipals, callable agencies, and corporates have tightened significantly more.

30- and 15-year fixed-rate mortgage rates are down 86 and 80 bps, respectively, from their recent highs.  This has sent the mortgage refinance index higher in recent weeks. For the week ending 3/29, the MBA Refinancing Index surged nearly 40%. This surge has caught the attention of investors, as we’ve seen MBS investors seemingly more focused of late on lower premiums and less prepayment risk.

Mortgage prepayments increased across the board in March. Part of the increase is seasonal as the 2019 “housing season” has kicked off in many markets, but a good portion is refinance activity as evidenced by the MBA Refinancing Index hitting a level not seen since 2016.  A great deal of the refi activity is coming from jumbo collateral (40 CPR in March).  Read more about the March prepayment report here.

The following represents an overview of the activity last week:


15-Year MBS


20-Year MBS


30-Year MBS



Mortgage Rates and Refinance Activity

Benchmark mortgage rates were mixed last week. 15-year mortgage rates ticked up 7 bps to 3.49%, while 30-year mortgage rates declined 1 bp to 4.07%.


Mortgage Applications Surge As Refinancing Activity Spikes on Lower Rates: Mortgage applications jumped 18.6% last week, the second best week for activity since early January 2016. Purchase applications (+3.4%) were positive for a fourth week in a row but the primary boost came from a surge in refinance applications. Total refinancing activity jumped 38.5% last week, the second strongest week of the cycle. Over that four week period, purchase applications have picked up 15% while refinancing has risen more than 60%. The weekly mortgage applications data continue to reflect the rate sensitivity of the housing sector and provide hopes for home sales heading into the spring selling season.

Michael S. Erhardt, CPA

Senior Vice President, Investment Strategies

Vining Sparks IBG, LP

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