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

Last week, a reprieve in the back-up in Treasury yields proved to be short-lived as remarks from a key Fed leader reignited focus on the central bank’s plans for aggressive monetary policy tightening.  New York Fed President, John Williams, stated that raising interest rates in 0.50% intervals was a “reasonable option.”  The yield on the […]

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Agency Market Update

The Treasury curve steepened last week as shorter-term yields declined while the longer end sold off, sending the 10-year yield to 2.83%, up another 12 basis points from the week before.  With the 10-year yield moving higher, the 2s-to-10s spread had un-inverted the previous week, and last week the 3s-to-10s spread moved into positive territory […]

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Fixed Rate Mortgage Market Update

Current Yield Spreads The Treasury curve steepened again last week as the market digested the latest inflation data.  The 2s/10s slope increased 19 bps to 38 bps as the 2-year Treasury yield declined 6 bps to 2.45% and the 10-year Treasury yield increased 13 bps to 2.83%. Headline and core CPI for March accelerated from […]

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Municipal Market Update

In this week’s Municipal Market Update, we highlight the following: Municipal prices weakened last Monday, were mixed on Tuesday and Wednesday, and steady on Thursday, 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 for […]

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SBA Market Update

Fixed-Rate SBA DCPCs (SBAP) Investor interest in fixed-rate SBA DCPCs remains strong as SBA DCPCs and SBICs offer superior convexity profiles to most residential MBS alternatives. The DCPC auction priced at historically tight spreads for much of 2021; however, spreads have widened approximately 90 bps since June 2021. Debenture rates increased and yield spreads widened […]

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CMO Market Update

CMO activity was lighter than usual last week ahead of Thursday’s early close and the holiday weekend. One structure that saw decent demand was a 3.0% PAC off FNCL 4.0% collateral. Yield Book projects a WAL of 4.3 in the base case, with minimal extension in rising rates scenarios (around 5 years +300 bps). As […]

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