March 7, 2022
Current Yield Spreads
The Treasury market rallied last week as the war in Ukraine entered its second week and investors continued to shed risk assets. The 2s/10s slope narrowed to 25 bps, its lowest level since March 2020. Nominal yield spreads on 15-year MBS current-coupon production widened 6 bps to 43 bps, while yield spreads on 30-year MBS to Treasurys with similar duration widened 7 bps to 101 bps. Yield spreads are comfortably above pre-pandemic levels for the 30-year sector.
The summary below reflects customer purchase activity from the previous week. Activity was heavily focused on UMBS 20-year 2.5s as spreads in this sector continue to look favorable compared to 15-year MBS. There was also strong demand for UMBS 15-year 2.0s and GN 15-year Jumbo 2.0s.
Mortgage Rates & Applications
Mortgage rates declined last week for the first time this year. The 30-year rate dropped 15 bps to 4.10% and the 15-year rate declined 7 bps to 3.40%. Mortgage application volume was essentially flat compared with the previous week. Applications to refinance a home loan increased 1% for the week but were still 56% lower than the same week one year ago. Mortgage applications to purchase a home fell 2% for the week and were 9% lower year over year.
Michael S. Erhardt, CPA
Senior Vice President, Investment Strategies