June 28, 2021
Current Yield Spreads
Spreads on 15-year MBS (1.5s) tightened 8 bps to 41 bps during the past week, reversing the 4 bps of widening that occurred the previous week. Spreads for 30-year MBS (2.0s) were stable at 50 bps. Last week we heard from several Federal Reserve speakers about the housing market and possibility of tapering or ending the Fed’s current mortgage buying program. Investors were unfazed by the chatter and seem to be convinced the central bank will tighten policy on a very gradual basis based on current MBS valuations. The market continues to be supported by financial institutions with significant liquidity from deposit inflows and spotty loan demand.
The summary below reflects purchase activity from the previous week. The most active trades were UMBS 15-year 1.5s and 20-year 2.0s.
- UMBS 10-year 1.5s & 2.0s (10-year pools are showing improved stability in lower rate environments)
- UMBS 15-year 1.0s to 3.0s (1.5s the most traded)
- UMBS 20-year 1.5s to 3.0s (2.0s the most traded)
- UMBS 30-year 2.0s & 2.5s (2.5s the most traded)
- FNMA 30-year Jumbo 2.0s & 2.5s
- GNMA 30-year Jumbo 3.5s
- LLB Pools ($85k -$150k max loan size) and NY collateral
- Custom CRA Pools
Mortgage Rates and Applications
U.S. mortgage rates were mixed for the week ending 6/25 according to Bankrate.com. The 15-year mortgage was higher by 1 bp to 2.44% and the 30-year mortgage rate declined 4 bps to 3.13%. Mortgage applications for the week ending 6/18 rose 2.1% despite the 30-year mortgage rates ticking up during the reporting period. Purchase applications inched up 0.6% while refi apps gained 2.8%. Both types of applications have weakened in 2021 and have since remained in a holding pattern.
Michael S. Erhardt, CPA
Senior Vice President, Investment Strategies
Vining Sparks IBG, LP