FRM Update

March 25, 2019

The strong bond market rally sent yield spreads on current coupon MBS to Treasuries tighter last week, with 15-year tightening 1 bps to 46 bps, while 30-year tightened 7 bps to 65 bps.  The curve inversion and volatility in the bond market has created some additional opportunities and strategies for investors. Last week we noted that some investors were anxious to deploy excess cash in fear of higher prices and lower yields, while others were able to execute swaps with more favorable pricing for dispositions.

The following represents an overview of the activity in recent weeks:


15-Year MBS


20-Year MBS


30-Year MBS



Mortgage Rates and Refinance Activity

Benchmark mortgage rates continued their decent last week. 15-year mortgage rates decreased 11 bps to 3.47%, while 30-year mortgage rates declined 14 bps to 4.17%, marking the lowest level in over a year.

Mortgage applications for the week ending March 15 rose 1.6% on a 0.3% increase in purchase apps and 3.5% increase in refi apps. Refi apps have actually increased over the past month, the most convincing uptick since September 2017, as mortgage rates have dropped. Purchase apps remain weak, but have shown a little life rising 4% over the last few weeks.


Housing News:

Home Builder Confidence Unchanged in March: Home builder confidence was unchanged in March, disappointing expectations for a one-point improvement. The NAHB’s Housing Market Index held at 62, a five-month high but down 8 points from a year ago and below levels seen throughout most of 2017 and 2018. The details were mixed with improved sales expectations offset by a cooling in traffic of prospective buyers. The mixed results followed a noisy new home sales report last week showing slower-than-expected January activity that was salvaged somewhat by 63k in positive revisions to the prior three months. Mortgage rates have declined around 0.50% since November, helping ease affordability pressures. The NAHB’s Chairman commented, “Builders report the market is stabilizing following the slowdown at the end of 2018, and they anticipate a solid spring home buying season.”

Michael S. Erhardt, CPA

Senior Vice President, Investment Strategies

Vining Sparks IBG, LP

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