FRM Update

June 26, 2017

Activity was light last week in both the MBS and CMO sectors, but did improve later in the week as portfolio managers approach the deadline for quarter end settlement.  Bond market volatility remains low after the Fed meeting offered additional details on QE tapering and the unwinding of MBS holdings.  The MBS market has displayed almost no measurable response as MBS yield spreads have only widened a few basis points and mortgage rates have been generally unchanged over the last two weeks and are at the lowest levels this year.  The MBA mortgage applications index rose for the third consecutive week to the highest level since November 2016.  While refi apps increased 2.1% last week, refi activity and MBS prepayments are still relatively low in reference to the last several years.  The housing data finally received some positive news with May’s new and existing home sales reports.




Trading activity in CMOs improved Thursday and Friday last week as bid list activity has picked up prior to the close of the quarter.  Yield spreads in CMOs were generally unchanged last week, similar to the MBS sector.  Depositories were focused on stable structures with 3- to 6-year average lives in higher coupon sequential structures.


Rates and Refis


The housing data finally received some positive news with May’s new and existing home sales reports.

Dan Stimpson, CPA

Senior Vice President

Vining Sparks

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