FRM Update

November 4, 2019


Yield spreads for current coupon MBS to Treasurys tightened last week. 30-year MBS tightened by 7 bps to 100 bps, while 15-year tightened 3 bp to 67 bps. Despite the recent retreat from the wides of the year, MBS valuations remain compelling. 15-year continue to be attractive versus 30-year (see graph below).

The refi index has settled in at near 2000 for the second straight week, which is 25% below the peak level from mid-August.  October prepayments, which will be released this week, are likely to show the highest speeds of the year, but the recent pull-back in the refi index may provide some reprieve during November.

Activity was steady last week with a variety of trades in all sectors. The following is a list of actively-traded sectors and coupons:


Mortgage Rates and Refinance Activity

Benchmark mortgage rates edged down last week. 15-year mortgage rates declined 1 bp to 3.16%, while 30-year mortgage rates fell 2 bps to 3.75%.

Mortgage applications to buy a home for the week ending October 25 increased 2% and were 10% higher than a year ago.  Meanwhile, applications to refinance a mortgage fell 1% for the week, but refinance volume was still 134% higher last week when compared annually.

Michael S. Erhardt, CPA

Senior Vice President, Investment Strategies

Vining Sparks IBG, LP

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