FRM Update

February 7, 2022

Current Yield Spreads

Performance in the mortgage passthrough market was mixed last week.  Nominal yield spreads on 15-year MBS current coupon production tightened 1 bp to 19 bps, while yield spreads on 30-year MBS to Treasurys with similar duration widened 6 bps to 71 bps.

Trading Activity

The summary below reflects customer purchase activity from the previous week. Buying was mainly distributed between 15-, 20-, and 30-year UMBS securities. Roughly 15% of the deliverable securities had some form of prepayment protection (low loan balances, investor loans, and/or favorable geography of originations).  The majority of the 30-year activity was centered on 25-year new production 2.0s and 2.5s.  Activity was modest in 10-year passthroughs since spreads remain relatively tight. There was also modest activity in 15- and 30-year GN Jumbo 2.5s.

Mortgage Rates & Applications

Mortgage interest rates continued to trend higher last week.  The 30-year rate increased 21 bps to 3.95% and the 15-year climbed 14 bps to 3.31%. The 30-year mortgage rate has increased an astonishing 76 bps over the past six weeks.  Mortgage applications for the week ending January 28 jumped 12.0% despite the increase in rates. Purchase applications rose 4.0% and continued their trend higher.  Refi applications broke from their trend lower that began in early 2021 and jumped a surprising 18.4%.

Michael S. Erhardt, CPA

Senior Vice President, Investment Strategies

Vining Sparks

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