FRM Update

August 2, 2021

Current Yield Spreads

The FOMC kept policy unchanged last week, leaving its overnight target rate at 0.00-0.25% with plans of continuing asset purchases of $120 billion per month.  The official FOMC statement acknowledged the economy has made progress towards the goals needed to alter asset purchases, but it didn’t provide any new information about a potential timeline.  Powell did mention that there’s very little support for tapering MBS purchases in advance of Treasurys.

The dovish FOMC statement and Powell’s comment regarding tapering helped support the MBS sector and yield spreads recovered most of the widening that occurred earlier in the week. For the week yield spreads on 15-year MBS (1.5s) tightened by 1 bp to 37 bps, while yield spreads on 30-year MBS (2.0s) widened 2 bps to 66 bps.

Trading Activity

The summary below reflects purchase activity from the previous week.  Activity was concentrated in the 20-year sector with low coupons. There was also a pick-up in activity in collateral with prepayment friction (low loan balances, NY, and FL).

TBA-Eligible Securities:

Non-Deliverable Securities:

Specified Pools:

Mortgage Rates and Applications

U.S. mortgage rates continued to decline last week according to  Both 15-year and 30- mortgage rates declined 3 bps to 2.98% and 2.28%, respectively.  The 15-year rate at 2.28% is at an all-time low.

Mortgage applications for the week ending July 23 rose 5.7%. Pushing applications up was a 9.3% gain in refinance applications.  Disappointingly, purchase applications fell another 1.6% and are now down 26% from January.

Michael S. Erhardt, CPA

Senior Vice President, Investment Strategies

Vining Sparks IBG, LP

The information included herein has been obtained from sources deemed reliable, but it is not in any way guaranteed, and it, together with any opinions expressed, is subject to change at any time. Any and all details offered in this publication are preliminary and are therefore subject to change at any time. This has been prepared for general information purposes only and does not consider the specific investment objectives, financial situation and particular needs of any individual or institution. This information is, by its very nature, incomplete and specifically lacks information critical to making final investment decisions. Investors should seek financial advice as to the appropriateness of investing in any securities or investment strategies mentioned or recommended. The accuracy of the financial projections is dependent on the occurrence of future events which cannot be assured; therefore, the actual results achieved during the projection period may vary from the projections. The firm may have positions, long or short, in any or all securities mentioned. Member FINRA/SIPC.
Copyright © 2022
This is a publication of Vining-Sparks IBG, LLC
775 Ridge Lake Blvd., Memphis, TN 38120