FRM Update

May 6, 2019


Yield spreads on current-production MBS to Treasuries were mixed last week, with 15-year tightening 3 bps to 45 bps while 30-year held firm at 72 bps.  The recent outperformance to rates is likely a reflection of the low implied volatility, consistent demand, and a presumed decline in refinancing demand. After peaking at 1583 in early April, the MBA Refinance Index has slumped 22%, the result of a slight uptick in mortgage rates.

On Friday morning, Ginnie Mae released a Request for Input regarding a rule change that would restrict pooling into the multi-issuers for VA cash-out loans with LTVs above 90%. Over 60% of VA cash-out loans are currently issued with LTVs above 90%.  The proposed restriction is an attempt to curb the repeated mortgage refinancings that often harm both borrowers and investors.  A link to the press release can be found here.

Buying activity last week was spread among the various sectors outlined below. There was also decent two-way flow with customers disposing of odd-lots and underperforming positions.

The following represents an overview of the activity last week:

15-Year MBS

20-Year MBS

30-Year MBS


Mortgage Rates and Refinance Activity

Benchmark mortgage rates ticked up slightly last week. 15-year mortgage rates increased 1 bp to 3.50%, while 30-year mortgage rates rose 5 bps to 4.09%.

Michael S. Erhardt, CPA

Senior Vice President, Investment Strategies

Vining Sparks IBG, LP

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