FRM Update

December 13, 2021

Current Yield Spreads

Mortgages performed well last week as the broader market sold off and the 10-year Treasury improved 14 bps to finish the week at 1.49%. Nominal yield spreads on 15-year MBS tightened 5 bp to 16 bps, while spreads on 30-year MBS to Treasurys with similar duration tightened 4 bps to 58 bps.

Trading Activity

The summary below reflects customer purchase activity from the previous week. Activity was dominated by UMBS 20-year 2.0s (both new production and semi-seasoned pools). Rich valuations on 15-year passthroughs continue to push investors to longer finals with higher spreads.

There’s also been solid two-way flow as depositories are actively repositioning (selling underperforming positions) to improve earnings in future periods.

TBA-Eligible Securities:

Non-Deliverable Securities:

Specified Pools:

Specified Pools:

Mortgage Rates and Applications

Bankrate’s most recent survey shows mortgage rates were on the rise last week. 15-year rates increased by 2 bps to 2.53%, while 30-year rates rose by 7 bps to 3.25%. Mortgage applications for the week ending December 3 rose 2.0% on a 9.0% increase in refi apps and a 5.0% decrease in purchase apps.  Refi apps are now down 45% from January’s average.  Purchase apps, which were down 27% through July, are now down just 13% from January.

Michael S. Erhardt, CPA

Senior Vice President, Investment Strategies

Vining Sparks

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.
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