FRM Update

January 22, 2019

A risk-on environment sent yields higher for the second consecutive week, as Treasury yields increased 7 to 10 basis points across the curve.   The resulting lower dollar prices provided a catalyst for MBS activity as investors took advantage of the highest yields available this year. The demand caused yield spreads on current production MBS to Treasuries to tighten 3 to 4 basis points on the week.  Valuations remain relatively attractive for buyers based on the basis widening that occurred during much of 2018.

Activity was primarily focused in the 15- and 30-year sectors.  In the 15-year space, investors added both seasoned and new production pools, with coupons ranging from 2.00% to 4.00%.  The activity in the 30-year sector was centered on new production GNMA single-issuer pools with 4.50% and 5.00% coupons.

The following represents a summary of the activity last week:


10-Year MBS


15-Year MBS

30-Year MBS



Mortgage Rates and Refinance Activity


Mortgage Apps: Mortgage applications for the week ending January 11 rose 13.5%, rising 40% over a two-week span after the previous week’s 23.5% increase.  Over the two-week span, purchase apps have risen 27% while refi apps have jumped 61%.  According to the MBA data, the average 30-year mortgage rate dropped to 4.74% during both observation periods, down from a peak of 5.17% in November.  While two weeks does not make a trend, the positive results improve the short-term outlook for housing activity.



Michael S. Erhardt, CPA

Senior Vice President, Investment Strategies

Vining Sparks IBG, LP

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