Sector Update

August 28, 2017

Yields and spreads finished very close to where they started last week. This means for the second week in a row comments about curve shape and changes in relative value get eclipsed by discussions about how minimal changes in market levels were. A 3bp decline in twenty-year Treasury yields and a 2bp increase in two-year Treasury yields resulted in a small amount of curve flattening worth mentioning mostly because it represents a continuation of an ongoing trend. And while the ten-year Treasury yield was only 2bp lower than the prior Friday, at 2.17% it finished trading at the lowest daily close since June 26th.

While yields in most sectors moved in close fashion to Treasuries last week, a tendency toward slighter tighter spreads displayed itself. A 2bp contraction in Treasury/swap spreads for two- through five-year maturities was reflected by a similar tightening across the short end of the corporate sector. Shorter-duration mortgage related securities also pushed slightly tighter, while 30yr MBS and most other longer mortgage products held steady.

More bid lists surfaced last week than the week prior, and it seemed the extended period of stable prices enabled some portfolio restructuring to occur more easily than usual as market levels changed minimally between analysis and execution in most cases. Heavy redemptions also resulted in portfolio activity, and more trades occurred last week than would be suggested by the near stagnant yield and spread levels.

On Friday, the five-year Treasury closed at 1.76%, 11bp below the daily closing average year-to-date and 3bp above the average for the last year of trading. The ten-year Treasury landed at 2.17%, 16p below the year-to-date average for the daily closing yield and 4bp above the average daily close for the last year.


Adjustable Rate Mortgage Market Update

On the data front last week, retail sales rose a seasonally adjusted 0.7% after rebounding 0.7% in August from July’s 1.8% slide.  As for monetary policy, we expect the Fed to commence asset purchase tapering in November, as indicated in its September meeting minutes.  On the week, yield spreads on Ginnie and conventional ARMs were […]

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Agency Market Update

Treasury yields resumed their march higher last week, at least in the intermediate portion of the curve, as the market continues to price in the Fed moving forward with tapering its asset purchases ahead of eventual rate hikes.  As can be seen in the chart below, the 3-year note moved higher by 11 basis points […]

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Fixed Rate Mortgage Market Update

Current Yield Spreads The Minutes from the Fed’s September meeting confirmed that officials are warming up to announcing their tapering plans soon. Most officials supported a plan developed by Fed staff that “was designed to be simple to communicate and entailed a gradual reduction in the pace of net asset purchases that, if begun later […]

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Municipal Market Update

In this week’s Municipal Market Update, we highlight the following: Municipal prices were steady on Tuesday and Wednesday, mixed on Thursday, and steady again on Friday, as reflected by weekly data for the Municipal Market Data (MMD) Triple-A Scale; also shown are the yields for the Municipal Market Advisors (MMA) Triple-A Scale; New-issue offerings are […]

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SBA Market Update

Fixed-Rate SBA DCPCs (SBAP) Investor interest in fixed-rate SBA product remains strong as SBA DCPCs and SBICs offer superior convexity profiles to most residential MBS alternatives. The DCPC auction has priced at historically tight spreads for much of this year; however, spreads have widened approximately 20 bps since June. Supply in the secondary market for […]

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CMO Market Update

Treasury yields continue to rise, particularly in the 3-5 year portion of the curve where our customers are most active in the CMO sector. As a result, traders observed CMO spreads tighten 2 basis points last week for fixed and floating-rate bonds. For the maturities and structures we monitor, CMO spreads have moved in a […]

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