FRM Update

March 14, 2022

Current Yield Spreads

The Treasury market sold off last week and yields climbed steadily across the curve. The 5-year Treasury increased 31 bps to 1.95% and the 10-year yield increased 26 bps to 1.99%, the largest weekly move since September 2019. Nominal yield spreads on 15-year MBS current coupon production tightened 6 bps to 37 bps, while yield spreads on 30-year MBS to Treasurys with similar duration were stable at 101 bps.

Trading Activity

The summary below reflects customer purchase activity from the previous week. Activity was focused on UMBS 15-year and 20-year passthroughs.  The most prevalent coupons in the 15-year sector were 1.5s to 2.5s while customers favored 2.5s and 3.0s in the 20-year sector.  There was also decent activity in specified pools (lower loan balance, NY, FL) as payups have declined on collateral with these characteristics.

Mortgage Rates & Applications

Mortgage rates rose this week after dropping the previous week. The 30-year rate increased 23 bps to 4.33% and the 15-year rate increased 16 bps to 3.56%. Mortgage rates have now risen over 100 bps this year.

Mortgage applications for the week ending March 4 rebounded 8.5% as mortgage rates took a breather from their run higher this year.  Both refinance and purchase applications increased for the first time in 5 weeks.  Purchase applications gained 8.6% while refinances gained 8.5%.

Michael S. Erhardt, CPA

Senior Vice President, Investment Strategies

Vining Sparks

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