FRM Update

May 10, 2021



Current Yield Spreads

The MBS rally finally reversed course last week as spreads to Treasurys widened modestly from historically tight levels.  Spreads on 15-year MBS widened 4 bps to 44 bps, while spreads for 30-year MBS widened 2 bps to 49 bps.


Trading Activity

The summary below reflects purchase activity from the previous week.  The 20-year sector experienced the most demand as investors focused on 20-year 1.5s and 2.0s.

TBA-Eligible Securities:

Non-Deliverable Securities:

Specified Pools:


Mortgage Rates and Applications

U.S. mortgage rates ticked downward last week according to Bankrate.com.  The 15-year mortgage rate decreased by 5 bps to 2.34% and the 30-year mortgage rate declined by 7 bps to 3.06%.  The 30-year mortgage rate has increased 16 bps this year, which is a fraction of the change in 10-year Treasury yields that have risen 65 bps.  Lenders have narrowed profit margins as capacity constraints have waned.

Mortgage applications for the week ending April 30 fell 0.9%.  Refi apps managed to gain 0.1% after having declined in 12 of the last 15 reports. Over that period, refis are down 32%.  Purchase apps fell 2.5% during the reference week and are now down 21% since mid-January.

The April MBS prepayment report showed the pace of refinancing declined slightly more than anticipated. FNMA aggregate speeds declined 21% to a still elevated 28CPR.  UMBS 30-year 2.5s experienced the largest change compared to the previous month, declining 38% to 19.3CPR. A portion of the decline in speeds was a function of having two fewer business days in April compared to March.  Our complete prepayment commentary can be found here.



The primary/secondary mortgage spread (average 30-year mortgage rate minus 30-year MBS current coupon) decreased 2 bp to 1.28%. The spread has remained relatively stable over the past month but has narrowed 22 bps this year.




Michael S. Erhardt, CPA

Senior Vice President, Investment Strategies

Vining Sparks IBG, LP

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