FRM Update

June 14, 2021



Current Yield Spreads

Current coupon MBS yield spreads to comparable Treasurys ended the week mixed. Spreads on 15-year MBS (1.5s) were stable at 45 bps, while spreads for 30-year MBS (2.0s) widened 2 bps to 55 bps.  30-year 1.5s were under pressure for the second consecutive week and widened 10 bps, likely because the Fed discontinued buying this coupon and investors favor lower duration and extension protection.



Trading Activity

The summary below reflects purchase activity from the previous week.  The most active sectors were UMBS 20-year 1.5s and 30-year 2.0s, followed by FNMA 30-year Jumbo 2.0s.

TBA-Eligible Securities:

Non-Deliverable Securities:

Specified Pools:


Mortgage Rates and Applications

U.S. mortgage rates inched lower last week according to Bankrate.com.  The 15-year mortgage slipped 1 bp to 2.36% and the 30-year mortgage rate decreased by 2 bps to 3.08%.  The 30-year mortgage rate is up from the January all-time low of 2.85% but remains historically low.

According to the Mortgage Bankers Association, mortgage applications for the week ending June 4 fell 3.1% as refinance applications declined 5.1% and purchase applications ticked up 0.3%.  Since January, purchase applications are now down 23% while refinance applications are down 37%. However, prepayments remain historically high.



The primary/secondary mortgage spread (average 30-year mortgage rate minus 30-year MBS current coupon) declined 1 bp to 1.31%. The spread has narrowed 19 bps this year. Lenders have room to tighten their profit margins further as the pace of refinance activity has slowed but staffing levels remain robust.




Michael S. Erhardt, CPA

Senior Vice President, Investment Strategies

Vining Sparks IBG, LP

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