FRM Update

July 31, 2017

Mortgage yield spreads tightened last week, but activity improved as the curve steepened and 10-year Treasury yields moved higher after positive news in Germany. Mortgage rates were essentially unchanged last week and mortgage applications for the week ending July 21 rose 0.4% as refi apps rose 3.4%. June’s new and existing home sales data continued to show slowing improvement for the overall housing sector.




Trading activity in CMOs was on the slower side and yield spreads in CMOs widened slightly last week. Depositories continue to be focused on stable structures with 4- to 6-year average lives. Full coupon front sequential structures off of 30yr 3.5% collateral (“3.5 squared”) remained popular with financial institutions with wider spreads and better supply than many shorter structures.


Rates and Refis




Housing data continue to perplex economists with very choppy data and frequently disappointing reports – despite lowered expectations.  June’s new and existing home sales data continued to show slowing improvement for the overall housing sector.

June’s Existing Home Sales Disappoint: Existing home sales for the month of June disappointed expectations, falling 1.8% MoM (exp. -0.9%).  Single family sales dropped 2.0% while multi-family sales were flat.  The weakest region was the South, dropping 4.7% while sales in the Midwest rose 3.1%.  On a year-over-year basis, existing home sales are now up just 0.7%.  Supply rose from 4.2 to 4.3 months in June; however, inventory has declined 7.1% YOY and the median sales prices of homes is up 6.5% YOY.

New Home Sales Rose in June but Continue Trend of Slowing Improvement: Sales of new homes did improve in June when compared to May 2017 (+0.8% MOM) and June a year ago. However, there was a negative revision of 27k to the three months prior, which left the total trajectory a little weaker than previously estimated. Supporting the story of slowing improvement, total sales were up 6.4% in 2Q 2017 when compared with 2Q 2016, but were down 12.3% on a seasonally adjusted annualized basis when compared to 1Q 2017.



Dan Stimpson, CPA

Senior Vice President

Vining Sparks

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 © 2023
This is a publication of Vining-Sparks IBG, LLC
775 Ridge Lake Blvd., Memphis, TN 38120