FRM Update

August 13, 2018

Yield spreads on current production MBS widened slightly this past week, as the sector failed to keep pace with the overall Treasury market rally on Thursday and Friday.  Both 15- and 30-year MBS yield spreads to Treasuries were wider by 2 to 3 bps.

The theme in the MBS sector continues to be investors seeking defensive style cash flow structures with an emphasis on shorter duration product.  The majority of portfolio additions continue to be seasoned paper at low or discounted dollar prices.

The following represents a summary of the activity we observed last week:

Mortgage Rates and Refinance Activity


Mortgage Applications: Mortgage applications for the week ending August 3, 2018 declined 3.0% from the previous week, the fourth consecutive weekly decline.  The refinance index led the overall drop in applications by falling 5.0% for the week.  This marks the index reaching its lowest point since December 2000.  The index has now declined 35.0% year over year. The purchase index fell 2.0% both on a seasonally adjusted and unadjusted basis since last week.

Michael S. Erhardt, CPA

Senior Vice President

Investment Strategist

Vining Sparks, IBG

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