FRM Update

October 25, 2021

Current Yield Spreads

Mortgages outperformed Treasurys for the third consecutive week but did come under some pressure during the latter part of the week on comments by the Fed.  Fed Chair Powell said supply constraints have gotten worse and are likely to linger into next year, keeping inflation elevated for longer than expected; the Fed won’t hesitate to raise rates if longer-term inflation expectations become unanchored. For the week, nominal yield spreads on both current coupon 15- and 30-year MBS to Treasurys tightened 4 bps to 23 bps and 56 bps, respectively.

Trading Activity

The summary below reflects customer purchase activity from the previous week. Activity was strong as depositories took advantage of lower dollar prices.  UMBS 15-year 1.5s led trading activity followed closely by UMBS 20-year 2.0s.  There was also good activity in UMBS 20-year 1.5s as prices slipped below par.

TBA-Eligible Securities:

Non-Deliverable Securities:

Specified Pools:

Custom CRA Pools

Mortgage Rates and Applications

The sell-off in Treasurys last week pushed mortgage rates slightly higher according to Bankrate’s most recent survey. 15-year rates rose 6 bps to 2.46%, while 30-year mortgage rates increased 5 bps to 3.19%. Rates remain historically low but are currently at the highest levels seen since June.

Mortgage applications for the week ending October 15 were down 6.3% on a 4.9% decline in purchase applications and a 7.1% reduction in refinance activity.  Going back to January, when mortgage rates hit their lows, purchase applications are now down 22% while refi applications have fallen 38%.

Michael S. Erhardt, CPA

Senior Vice President, Investment Strategies

Vining Sparks IBG, LP

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