FRM Update

August 21, 2017

Trading activity across the MBS and CMO sectors improved last week as the mortgage market, similar to the overall bond market, continues to trade in a tight range with minimal changes in yield spreads even as the Fed discusses the potential unwinding of QE. Mortgage yield spreads and mortgage rates were essentially unchanged last week. Mortgage applications moved slightly higher last week, while housing data continues to remain choppy with housing starts and building permits much weaker than expected in July. However, the NAHB’s home builder index improved unexpectedly in August on stronger current and expected sales metrics.



Trading activity in CMOs improved last week on stronger flows from secondary markets combined with wider yield spreads in certain CMO structures last week. Depositories continue to focus on stable structures with 4- to 6-year average lives.

Rates and Refis


Housing Starts and Building Permits Disappoint: New construction activity continued its choppy run with an unexpected 4.8% drop in new home starts. Adding to the disappointment, June’s starts data were revised lower as well. Continuing the recent trend, multi-family activity was the primary driver of the weakness, falling 15.3% MoM and 33.7% YoY. Building permits, the precursor to the starts data, also fell more than expected, down 4.1% MoM. Multi-family permits dropped 11.2% MoM while single family permits were unchanged for the month.

Dan Stimpson, CPA

Senior Vice President

Vining Sparks

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