FRM Update

September 30, 2019


Yield spreads for current coupon MBS to Treasurys were mixed last week as the overall Treasury market moved higher in price. 30-year MBS widened by 2 bps to 100 bps, while 15-year tightened 1 bp to 68 bps.

Refi risk appears to have receded over the past few weeks.  The latest refi index is currently 30% below the mid-August peak. Yield spreads on mortgage product remain at multi-year highs, making for relatively attractive valuations, especially in 15-year.  Based on spread metrics, 15-year have reached some of the cheapest levels versus 30-year in some time (see graph below).

Activity was steady last week as investors continued to add MBS. The following is a list of actively traded sectors and coupons:


Mortgage Rates and Refinance Activity

Benchmark mortgage rates were relatively stable last week. 15-year mortgage held firm at 3.21%, while 30-year mortgage rates decreased 1 bp to 3.74%.  Mortgage applications for the week ending September 20 fell 10.1% on a 3.1% drop in purchase apps and a 15.2% drop in refi apps.  Even with the pullback in weekly purchase apps, the monthly data still point to a positive month for home purchases.

Michael S. Erhardt, CPA

Senior Vice President, Investment Strategies

Vining Sparks IBG, LP

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