February 28, 2022
Current Yield Spreads
MBS yield spreads continued to widen last week in anticipation of quantitative tightening and rate hikes from the Fed. Nominal yield spreads on 15-year MBS current coupon production widened 5 bps to 37 bps, while yield spreads on 30-year MBS to Treasurys with similar duration widened 2 bps to 94 bps. Yield spreads have now widened to pre-pandemic levels for the 30-year sector.
The summary below reflects customer purchase activity from the previous week. Activity was robust and focused on UMBS 15-year 2.5s as spreads in this sector have widened in recent weeks. There was also demand for 15-year Jumbo 1.5s and 2.0s as well as 30-year Jumbo 2.5s.
Mortgage Rates & Applications
The average 30-year mortgage rate climbed 6 bps last week to 4.25%, the highest level since March 2019. Mortgage applications for the week ending February 18 fell another 13.1% week-over-week as the impact of higher mortgage rates takes a toll. Refi applications fell another 15.6% and continued their downward trend that began in early-2021, down 63% over that period. Purchase applications broke out of their positive trend falling 10.1% to their lowest level since spring 2020.
Michael S. Erhardt, CPA
Senior Vice President, Investment Strategies