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.
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.
- UMBS 10-year 1.5s
- UMBS 15-year 1.0s to 3.5s (1.5s the most traded)
- UMBS 20-year 1.5s to 2.5s (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 2.5s
- GNMA 30-year Jumbo 2.0s & 2.5s
- Low loan balance pools with a maximum loan amount ranging from $85k to $225k, and pools with NY collateral
- Custom CRA 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