FRM Update

September 20, 2021

Current Yield Spreads

The 10-year Treasury closed last week at 1.36%, its highest weekly close in 12 weeks. Volatility was higher ahead of this week’s Fed meeting as both the 5-year Treasury and FNMA 30-year 2.5s traded in an ~17 tick range. Nominal yield spreads on 15-year MBS (1.5s) to Treasurys with similar duration widened by 2 bps to 37 bps, while yield spreads on 30-year MBS (2.0s) widened 1 bp to 71 bps. The market focus this week will be on the FOMC policy decision and projections due on Wednesday. MBS investors will be acutely focused on whether the Fed announces a tapering of asset purchases. The general expectation remains that they will slow purchases before year-end barring any disastrous and unexpected economic, fiscal, or geopolitical outcomes.

Trading Activity

The summary below reflects customer purchase activity from the previous week. Activity was led by accounts looking for yield as UMBS 30-year 2.5s and FNMA 30-year Jumbo 2.0s were the most prevalent trades.

TBA-Eligible Securities:

Non-Deliverable Securities:

Specified Pools:

Mortgage Rates and Applications

Mortgage rates declined slightly for the third consecutive week according to Bankrate’s most recent weekly survey. The 15-year rate decreased 3 bps to an all-time low of 2.28% while the 30-year rate fell 1 bp to 3.00%. The benchmark 30-year rate is 32 bps below the 52-week high of 3.32%, and 15 bps higher than the 52-week low of 2.85%.

Mortgage applications improved on a strong week for purchase applications. Mortgage applications rose 0.3% during the week ending September 10 on mixed results categorically.  Refinance applications fell 3.2% from the previous week but purchase applications jumped 7.5%, the third-best weekly jump of the year.  The four-week moving average for purchase applications is now up 5.1% over the past four weeks.

Michael S. Erhardt, CPA

Senior Vice President, Investment Strategies

Vining Sparks IBG, LP

The information included herein has been obtained from sources deemed reliable, but it is not in any way guaranteed, and it, together with any opinions expressed, is subject to change at any time. Any and all details offered in this publication are preliminary and are therefore subject to change at any time. This has been prepared for general information purposes only and does not consider the specific investment objectives, financial situation and particular needs of any individual or institution. This information is, by its very nature, incomplete and specifically lacks information critical to making final investment decisions. Investors should seek financial advice as to the appropriateness of investing in any securities or investment strategies mentioned or recommended. The accuracy of the financial projections is dependent on the occurrence of future events which cannot be assured; therefore, the actual results achieved during the projection period may vary from the projections. The firm may have positions, long or short, in any or all securities mentioned. Member FINRA/SIPC.
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