FRM Update

November 27, 2017

Mortgage sector yields continued to trade in a tight range during the holiday-shortened week. Mortgage yield spreads were mixed versus Treasuries and remain historically tight. The MBA Refi Index fell 4.8% to 1306, falling nine of the last eleven weeks. Existing home sales were better than expected in October with the annualized 5.48MM unit pace the strongest level since June; however, YoY sales were down for a second consecutive month for the first time since 2014.





CMO spreads were unchanged last week, while activity in CMOs slowed compared to recent levels. Investor focus was primarily in short GNMA PAC structures offering extension protection and approximately 2.5% yield and 2.5-year average lives. Full coupon front sequential structures off of 30yr 3.5% collateral (“3.5 squared”) remained popular with financial institutions with wider spreads and better supply than many shorter structures.  Depositories continue to focus on stable structures with 4- to 6-year average lives.



Mortgage Rates and Refinance Activity




Existing Home Sales Top Estimates: Existing home sales were better than expected in October, with the annualized 5.48MM unit pace the strongest level since June. A portion of the gains were driven by a recovery of sales in the South that slowed after the hurricanes. Sales in the South improved 1.9% in October after falling more than 7% combined in the two months prior, but still registered their third weakest pace in more than a year. The improvements were geographically diverse with sales in the Northeast up 4.2%, sales in the West 2.4% higher, and activity in the Midwest improving by 0.8%. While this report in isolation provides a solid data point for home sales, a broader view shows continued headwinds. On a YoY basis, sales were down for a second consecutive month for the first time since 2014.




Dan Stimpson, CPA

Senior Vice President

Vining Sparks

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