FRM Update

January 8, 2018



Mortgage yield spreads versus Treasuries tightened last week and yield spreads remain historically tight. Mortgage rates rose a couple of basis points, and mortgage applications rose 0.7% from a 1.4% increase in refinance activity. The Refi Index has fallen twelve of the last sixteen weeks and refi activity remains at historically low levels. Mortgage prepayment speeds in December slowed for a second consecutive month. December speeds declined slightly less than anticipated, with GNMA speeds slowing the most. January should continue the gradual trend toward slower prepayment speeds. For additional prepayment commentary and charts, please see our December Prepayment Commentary.

MBS

 




CMOs

CMO spreads were unchanged to slightly tighter in various types of structures last week, while investor activity was slower than normal due to the holiday shortened week and the focus on year-end close.

 

Mortgage Rates and Refinance Activity

 

 

 

 

December Prepayment Speeds

Mortgage prepayment speeds in December slowed for a second consecutive month. An approximate $6 billion decrease in monthly MBS issuance, according to SIFMA, indicate a continued gradual decline in mortgage activity. December speeds declined slightly less than anticipated, with GNMA speeds slowing the most. A one-day reduction in day count and a small increase in mortgage rates resulted in slower prepayments. January should continue the gradual trend toward slower prepayment speeds due to a combination of seasonal factors, further gradual mortgage rate increases, and a lower day count. For additional prepayment commentary and charts, please see our December Prepayment Commentary.

 

 

Housing

Construction spending was higher than expected in November. Total spending on construction projects improved 0.8% in November compared with expectations for a 0.5% gain. Combined, the results show activity for the three months ended in November was 0.8% better than expected and should have positive GDP implications. Residential and non-residential spending at both the public and private levels improved. Spending on private residential projects rose 1.0%, while private non-residential spending rose a similar 0.9%. The public sector spent 5.1% more on residential projects while non-residential activity edged just 0.1% higher.

 

 


Dan Stimpson, CPA

Senior Vice President

Vining Sparks

INTENDED FOR INSTITUTIONAL INVESTORS ONLY.
The information included herein has been obtained from sources deemed reliable, but it is not in any way guaranteed, and it, together with any opinions expressed, is subject to change at any time. Any and all details offered in this publication are preliminary and are therefore subject to change at any time. This has been prepared for general information purposes only and does not consider the specific investment objectives, financial situation and particular needs of any individual or institution. This information is, by its very nature, incomplete and specifically lacks information critical to making final investment decisions. Investors should seek financial advice as to the appropriateness of investing in any securities or investment strategies mentioned or recommended. The accuracy of the financial projections is dependent on the occurrence of future events which cannot be assured; therefore, the actual results achieved during the projection period may vary from the projections. The firm may have positions, long or short, in any or all securities mentioned. Member FINRA/SIPC.
Copyright © 2021
Member FINRA/SIPC
This is a publication of Vining-Sparks IBG, L.P.
775 Ridge Lake Blvd., Memphis, TN 38120