FRM Update

September 17, 2018

Yields spreads for current production coupon MBS to Treasuries tightened a couple of basis points this past week, as the overall bond market trended higher in yield for the second consecutive week.  Valuations continue to remain near their highs for the year despite the modest tightening. The performance in recent weeks has occurred even as the 10-year Treasury has inched up to 3.00%.

Activity last week was stronger as participation improved.  The underlying theme continues to be driven by investors seeking current cash flow and protection from rising market rates.  With the Fed now expected to increase rates twice more this year, investors have focused primarily on defensive structures such as new issue or seasoned 15-year MBS.

The following represents a summary of the activity last week and themes in the overall sector:

Mortgage Rates and Refinance Activity


Mortgage Applications: Mortgage applications decreased 1.8% from one week earlier as interest rates moved higher. Refinance submissions decreased 6.0% from the previous week to the lowest level since December 2000.  The refinance share of application activity decreased to 37.8% from 38.9% the previous week.

Michael S. Erhardt, CPA

Senior Vice President

Investment Strategist

Vining Sparks, IBG

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