FRM Update

February 5, 2018

Mortgage related security yields increased again last week continuing the trend higher this year, as treasury yields and mortgage rates have pushed higher. Mortgage yields are currently in the upper end of the trading range so far for 2018. This increase in MBS yields drove 30-year mortgage rates 20bps higher last week and 45bps higher this year. The MBA Refi Index fell 2.9% to 1288 and remains slightly below its 12-month average of 1346. Refinance activity continues to be historically low and range-bound. Pending home sales and prices continue to push higher, with prices at the fastest rate of growth in almost four years.






CMO yields have increased, and for typical bank-type structures yields of 3.00% or higher are attainable.  CMO yield spreads tightened a couple of basis points in various types of structures last week. Investor activity is focused on structures that offer 3% yields and weighted average lives around five years in front end sequential and VADM structures.



Mortgage Rates and Refinance Activity



Three reports on housing were released last week and all three showed increased activity or levels for the month.  Overall construction spending was weaker than expected to close 2017, as better‐than‐expected December activity was offset by negative revisions to the prior two months. Pending home sales and prices continue to push higher, with prices at the fastest rate of growth in almost four years.



Dan Stimpson, CPA

Senior Vice President

Vining Sparks

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