FRM Update

October 15, 2019


Yield spreads for current-coupon MBS to Treasurys widened last week as trade optimism drove Treasury yields higher. 30-year MBS widened by 2 bps to 105 bps, while 15-year increased 4 bps to 72 bps. The spread widening has propelled MBS valuations, especially in 15-year pools. 15-year continue to be very compelling versus 30-year (see graph below).

Activity was strong in the second half of the week as investors took advantage of the market sell-off and backup in yield. Demand was solid for all maturities, but newly-issued 20-year 3.0s were the most heavily traded. The following is a list of actively traded sectors and coupons:


Mortgage Rates and Refinance Activity

Benchmark mortgage rates increased last week. 15-year mortgage increased 7 bps to 3.19%, while 30-year mortgage rates increased 9 bps to 3.80%.

Mortgage applications for the week ending October 4 rose another 5.2% at mortgage rates fell further, sparking another good week for refinances.  Refi apps rose 9.8% but purchase apps pulled back 0.9%.  For the third quarter, mortgage rates averaged their lowest quarterly average since 2Q16 and 3Q16.  With the average outstanding mortgage rate for all homeowners with mortgages (Federal Reserve data) currently at 3.87%, rates have now fallen sufficiently low to be a catalyst for both purchase and refinance activity.

Michael S. Erhardt, CPA

Senior Vice President, Investment Strategies

Vining Sparks IBG, LP

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
This is a publication of Vining-Sparks IBG, L.P.
775 Ridge Lake Blvd., Memphis, TN 38120