April 15, 2019
Treasury yields were 5-7bps higher on maturities 2-years and longer last week. This marks the second week in a row that yields moved higher following a previous run of declines for four straight weeks. Until Friday morning, yields had traded in about a 4bps +/- range and were virtually even on the week. Early Friday though, China reported stronger-than-expected exports and credit growth and Treasury yields jumped. This week, in terms of economic data, all eyes are focused on the Thursday retail sales reports.
- Same theme as last week, tighter spreads as Treasurys sold off.
- Agency Bullets saw spreads 1-3bps tighter on 5-Year+ Maturities.
- Agency Callables were 2-7bps tighter.
- Corporates were 3-6bps tighter.
- Municipals tightened in 7bps on short maturities and were flat further out the curve.
- CMOs tightened in 1bp, notable because spreads haven’t tightened in almost two months.
- MBS were mixed. 15yr MBS were tighter by 3bps and 30yr MBS were wider by 5bps.
What We’re Reading
“With earnings for S&P 500 companies widely expected to decline in the first quarter from the year-earlier period, analysts and investors said they would be trying to get a sense of whether growth is set to falter further or rebound in the following quarters.”
“The options aren’t new — buy, sell or hold — but rarely has the risk of each been so starkly defined. With 71 sessions in the book, the S&P 500 is having its best start in two decades. Central banks are pushing stimulus, spurring comparisons to melt-up years like 1999.”
Adjustable Rate Mortgage Market Update
Demand for new-issue hybrid ARMs slowed last week, which resulted in yield spreads to Treasuries widening 1 to 3 bps. The ARM origination cycle continued last week, with 157.9mm in new issue ARM selling split amongst Fannie Mae (71.3mm), Freddie Mac (6mm), and Ginnie Mae (80.6mm).Continue Reading
Agency Market Update
Agency bullet spreads for 5-year maturities and longer tightened in versus Treasuries, while spreads on bullets with shorter maturities were mostly unchanged. Callable agencies continued to move tighter versus Treasuries.Continue Reading
Fixed Rate Mortgage Market Update
Yield spreads on current production MBS to Treasuries were mixed last week, with 15-year tightening 3 bps to 42 bps, while 30-year widened 5 bps to 71 bps.Continue Reading
Municipal Market Update
For the week, municipal prices were mixed daily. New issue offerings are forecasted to be $3.6B for the holiday-shortened trading week.Continue Reading
SBA Market Update
The April fixed-rate DCPC auction last week included 20 and 25yr maturities. Issuance increased 34% MoM, while yield spreads versus Treasuries tightened 5 to 6bps. SBA prepayment speeds for SBA 7(a) pools paid at faster speeds in April than in the prior month.Continue Reading
CMO Market Update
CMO spreads to Treasurys tightened for the first time in almost two months. Granted, it was a modest tightening of one basis point, leaving spreads just below recent highs reached in late March.Continue Reading