FRM Update

May 22, 2017



Activity faded in the MBS and CMO sectors as the week progressed and Treasuries rallied. Higher prices, curve flattening and slightly tighter spreads between MBS and their Treasury benchmarks seemed to create just enough uncertainty to keep many portfolio managers on the sidelines last week. Mortgage application activity and mortgage rates declined last week. Housing data has shown results that mirror the larger economic trend – improving confidence, but weaker activity.

MBS


 

CMOs

Trading activity in CMOs was also light last week as the availability of specific structures continues to limit activity with issuance remaining quite weak and finding specific structures to match inquiries remains a challenge. Depositories were focused on stable structures with 4- to 6-year average lives, especially sequential structures. Full coupon front sequential structures off of 30yr 3.5% collateral (“3.5 squared”) remained popular with financial institutions as these types of structure have wider spreads and are in better supply than many shorter structures

Rates and Refis

 

 

Housing:  The housing data has shown results that mirror the larger economic trend – improving confidence, but weaker activity.

Homebuilder Confidence Remains High:  Prospective buyer traffic eased in the May NAHB Housing Market Index, but a 12-year high for future sales expectations helped push the headline index to the second-best level since June 2005.

New Housing Data Weighed Down by Weak Multi-Family Activity:  Housing starts and building permits unexpectedly declined in April and showed big misses relative to estimates; single-family starts were steady up 0.4% in April and increased 8.9% YOY, but single-family permits dropped 4.5%, the biggest monthly decline since February 2015.


Dan Stimpson, CPA

Senior Vice President

Vining Sparks

INTENDED FOR INSTITUTIONAL INVESTORS ONLY.
The information included herein has been obtained from sources deemed reliable, but it is not in any way guaranteed, and it, together with any opinions expressed, is subject to change at any time. Any and all details offered in this publication are preliminary and are therefore subject to change at any time. This has been prepared for general information purposes only and does not consider the specific investment objectives, financial situation and particular needs of any individual or institution. This information is, by its very nature, incomplete and specifically lacks information critical to making final investment decisions. Investors should seek financial advice as to the appropriateness of investing in any securities or investment strategies mentioned or recommended. The accuracy of the financial projections is dependent on the occurrence of future events which cannot be assured; therefore, the actual results achieved during the projection period may vary from the projections. The firm may have positions, long or short, in any or all securities mentioned. Member FINRA/SIPC.
Copyright © 2021
Member FINRA/SIPC
This is a publication of Vining-Sparks IBG, L.P.
775 Ridge Lake Blvd., Memphis, TN 38120