FRM Update

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.

Trading Activity

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

Vining Sparks

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