FRM Update

October 16, 2017

Mortgage rates and Treasury yields fell last week with unchanged to slightly tighter mortgage yield spreads even as the Fed is expected to begin the unwinding of their balance sheet this week. Mortgage applications fell for the fourth consecutive week, falling 2.1%. Mortgage rates fell last week, marking the first weekly decline in over a month. No housing reports were released last week; however, this week’s calendar is a housing-heavy week with reports on homebuilder confidence, new starts and permits, and existing home sales.




Trading in CMOs was on the slower side during the holiday shortened week. Consistent with MBS and other spread products, CMO spreads were unchanged to slightly tighter last week.  CMO investors were active in various types of CMO structures including front end sequential and PAC and VADM structures offering extension protection backed primarily by conventional and Relo collateral. Depositories continue to focus on stable structures with 3- to 6-year average lives.


Mortgage Rates and Refinance Activity




No housing reports were released last week; however, this week’s calendar is a housing-heavy week with reports on homebuilder confidence (Tue), new starts and permits (Wed), and existing home sales (Fri). Homebuilder confidence is expected to hold flat at 64 in October (a strong level historically). September’s housing starts and building permits data are both expected to show weak monthly results. September’s existing home sales data is expected to show a 0.9% MoM decline in sales, the sixth month of declines in 2017 and the fourth consecutive drop.




Dan Stimpson, CPA

Senior Vice President

Vining Sparks

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