FRM Update

January 28, 2019

Yield spreads on current production MBS to Treasuries widened 1 to 2 basis points on the week, with higher coupons underperforming modestly.  Valuations remain relatively attractive for investors looking to deploy cash, as yield spreads remain on the upper-end of the trading range.  Activity was good last week as financial institutions continue to favor the sector due to attractive yields, projected cash flow, and liquidity (particularly with TBA-eligible product).

The following represents a summary of the activity last week:

15-Year MBS


30-Year MBS



Mortgage Rates and Refinance Activity


Mortgage Applications Slow But Recent Trend Gives Optimism: Mortgage applications for the week ending January 18 fell 2.7% on a 2.2% drop in purchase apps and a 5.3% decline in refi apps.  Despite the disappointing weekly tally, applications have been on the uptick lately, giving reason for some optimism about future sales.  This optimism is particularly important after yesterday’s very disappointing existing home sales figures.  Moreover, the disappointing December home sales data would have reflected homes that predominantly went under contract in October and November.  Mortgage rates were at their peak at that time.  According to Freddie Mac’s Mortgage market Survey, the 30-year mortgage rate peaked in early-November at 4.94% and has since fallen 50 basis points.

Michael S. Erhardt, CPA

Senior Vice President, Investment Strategies

Vining Sparks IBG, LP

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