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.
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.
- UMBS 10-year 1.5s
- UMBS 15-year 1.0s to 2.5s (1.5s the most traded)
- UMBS 20-year 1.5s to 2.5s (2.0s the most traded)
- UMBS 30-year 2.0s and 2.5s
- FNMA 30-year Jumbo 1.5s to 2.5s (2.0s the most traded)
- GNMA 15-year Jumbo 2.5s
- Low loan balance pools with a maximum loan amount ranging from $85k -$150, and pools with NY & TX collateral
- Custom CRA Pools
Mortgage Rates and Applications
U.S. mortgage rates were relatively stable last week according to Bankrate.com. 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