FRM Update

September 11, 2017



Mortgage rates fell last week as longer Treasury yields have fallen recently to their pre-election levels.  The 30-year mortgage rate fell to 3.67% last week, the lowest since November 2016.  Trading activity across the MBS sector was on the slow side, while the CMO sector was active last week.  Prepayment speeds accelerated in August; however, the overall increase was below the increase in closing days, suggesting other factors, including mortgage rates, had neutral or perhaps slightly negative impacts.  September has three less business days than August, and thus nominal speeds may be slower despite the slow acceleration in refinance activity.  For additional prepayment commentary and charts, please see our August Prepayment Commentary.

MBS

 




CMOs

Trading in CMOs was active last week with slightly wider yield spreads in certain CMO structures. Depositories continue to focus on stable structures with 4- to 6-year average lives.  CMO issuance totaled approximately $14B in August, consistent with prior month levels.  Issuance was primarily in 3.5% squared sequential structures and in low loan balance conventional PAC’s.

 

 

Mortgage Rates and Refinance Activity

 

 

 

 

August Prepayment Speeds

Prepayment speeds accelerated 8% to 11% across a broad portion of the MBS market in August, below the 15% increase in closing days, suggesting other factors, including mortgage rates, had neutral or perhaps slightly negative impacts.  September has three less business days than August, and thus nominal speeds may be slower despite the slow acceleration in refinance activity.  Weather impacts will warrant consideration in upcoming prepayment analysis and discussions, as the combined impacts of less voluntary refinance activity and disaster related forbearance should suppress speeds for the near term.  For additional prepayment commentary and charts, please see our August Prepayment Commentary.

 

 

 

 


Dan Stimpson, CPA

Senior Vice President

Vining Sparks

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