FRM Update

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. 

Trading Activity

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

Vining Sparks

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