September 13, 2021
Current Yield Spreads
Nominal yield spreads on 15-year MBS (1.5s) to Treasurys with similar duration tightened by 5 bps to 35 bps, while yield spreads on 30-year MBS (2.0s) tightened 2 bps to 70 bps.
The summary below reflects customer purchase activity from the previous week. Activity was led by UMBS 20-year 2.0s followed by UMBS 15-year 1.5s. The pace of trading in non-deliverable securities declined as the sector has become more expensive over the past couple of weeks.
- UMBS 10-year 1.5s
- UMBS 15-year 1.0s to 2.0s (1.5s the most traded)
- UMBS 20-year 1.5s to 3.5s (2.0s the most traded)
- UMBS 30-year 1.5s to 2.5s (2.0s the most traded)
- FNMA 30-year Jumbo 2.0s & 2.5s (2.0s the most traded)
- GNMA 15-year Jumbo 2.0s & 2.5s
- GNMA 30-year Jumbo 2.5s
- Low loan balance pools with a maximum loan amount ranging from $85k to $225k, and pools with NY, FL, and TX collateral
- Custom CRA Pools
Mortgage Rates and Applications
U.S. mortgage rates drifted lower last week according to Bankrate.com. Both 15- and 30-year mortgage rates decreased 3 bps to 2.31% and 3.01%, respectively. Mortgage rates have essentially been in a holding pattern for most of the summer with the 30-year averaging 3.06% since the beginning of June. Meanwhile, mortgage applications remain soft despite low mortgage rates. According to the latest data from the Mortgage Bankers Association, mortgage applications for the week ending September 3 fell 1.9% as refi applications dropped 2.8% and purchase applications ticked down 0.2%. Despite continued low rates, weekly mortgage applications have shown little evidence of a resumption of the housing boom. While refi applications remain above their historical norm, they are also 28% below their January average. Purchase applications are mildly lower than their average over the past 30 years.
Michael S. Erhardt, CPA
Senior Vice President, Investment Strategies
Vining Sparks IBG, LP