July 19, 2021
Current Yield Spreads
Last week investors shrugged off the CPI release showing inflation rising at a 5.4% year-over-year pace as Federal Reserve Chair Jerome Powell testified before Congress and delivered a dovish message that eased concern over a near-term taper. The 10-year Treasury yield declined 7 bps to 1.29%. MBS yield spreads were unable to keep up with the Treasury rally and widened modestly for the week. Spreads on 15-year MBS (1.5s) widened by 1 bp to 40 bps, while yield spreads on 30-year MBS (2.0s) widened 4 bps to 63 bps.
The summary below reflects purchase activity from the previous week. The most actively traded sector was UMBS 20-year 1.5s & 2.0s, followed by UMBS 15-year in the same coupons.
- UMBS 15-year 1.0s to 3.0s (2.0s the most traded)
- UMBS 20-year 1.5s to 3.0s (2.0s the most traded)
- UMBS 30-year 1.5s
- FNMA 15-year Jumbo 2.0s
- FNMA 30-year Jumbo 2.0s
- GNMA 15-year Jumbo 1.5s to 2.5s
- LLB Pools ($85k -$175k max loan size)
- Custom CRA Pools
Mortgage Rates and Applications
U.S. mortgage rates declined slightly for the week according to Bankrate.com. The 15-year mortgage was lower by 4 bps to 2.38% and the 30-year mortgage rate declined 3 bps to 3.03%. The 30-year mortgage rate has now declined for a fourth consecutive week.
The Federal Housing Finance Agency will eliminate the Adverse Market Refinance Fee beginning on August 1st. The ½ point fee was an additional charge for any home loan guaranteed by Fannie Mae or Freddie Mac. The removal of the fee could put some downward pressure on mortgage rates.
Mortgage applications for the week ending July 9 jumped 16.0%, finally. Purchase applications rose 8.3% for the week and refi applications jumped 20.4%. However, both types of applications remain significantly lower than their pre-virus levels, -19% and -26%, respectively.
Michael S. Erhardt, CPA
Senior Vice President, Investment Strategies
Vining Sparks IBG, LP