FRM Update

August 16, 2021

Current Yield Spreads

Consumer confidence plunged to a near decade low in UM’s preliminary August report released on Friday. The report sent the 10-year Treasury lower by 7 bps on the day and flattened the 2s/10s slope to 107 bps.  Nominal yield spreads on 15-year MBS (1.5s) to Treasurys with similar duration tightened by 4 bps to 38 bps, while yield spreads on 30-year MBS (2.0s) tightened 2 bps to 68 bps. Higher coupons performed even better along the 30-year stack as 3.0s to 4.0s tightened 5 bps. The demand for higher coupons appears to be coming from CMO traders acquiring collateral.

Trading Activity

The summary below reflects customer purchase activity from the previous week.  Activity was strong and led by UMBS 15-year 1.5s, UMBS 20-year 2.0s, and FN Jumbo 30-year 2.0s. 20-year paper is becoming harder to source due to supply constraints.

TBA-Eligible Securities:

Non-Deliverable Securities:

Specified Pools:

Mortgage Rates and Applications

U.S. mortgage rates were relatively stable last week according to  15-year mortgage rates remained at 2.33% while 30- year mortgage rates increased 2 bps to 3.05%.  The 15-year rate remains near a record low and has declined 33 bps from one year ago.

Mortgage applications for the week ending August 6 rose 2.8% on a 1.8% increase in purchase applications and a 3.2% gain in refinance applications.  While refis have rebounded a bit over the past five weeks, purchase applications have remained slow, still down 26% from January’s level.

Michael S. Erhardt, CPA

Senior Vice President, Investment Strategies

Vining Sparks IBG, LP

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