FRM Update

November 12, 2019


Yield spreads for current coupon MBS to Treasurys tightened last week. 30-year MBS tightened by 4 bps to 96 bps, while 15-year tightened 6 bp to 61 bps. Despite the modest tightening, MBS valuations remain compelling compared to levels seen over the last several years.

The tepid demand for Treasurys and sell-off resulted in robust activity in the MBS sector, with broad based buying from investors taking advantage of lower dollar prices and new yield opportunities. The 15- and 20-year sectors continued to garner a healthy amount of demand, but we also saw strong buying in 30-year non-deliverable collateral (jumbo loans, relocation loans).

November factors were released last week, and we saw prepayment speeds increase once again.  This was largely expected given lower mortgage rates and two more business days in October.  A complete recap of our MBS prepayment commentary can be found here.

The following is a list of actively traded sectors and coupons from the previous week:


Mortgage Rates and Refinance Activity

The Treasury market sell-off pushed benchmark mortgage rates higher last week. 15-year mortgage rates increased 8 bps to 3.24%, while 30-year mortgage rates rose 6 bps to 3.81%.

Mortgage applications were essentially flat last week as a recovery in refinancing activity offset a slowdown in paperwork for new purchases. Interest in refinancing rose 1.8% while purchase applications pulled back 2.5%.

Michael S. Erhardt, CPA

Senior Vice President, Investment Strategies

Vining Sparks IBG, LP

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