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, the Fed kept policy unchanged but noted that “the economy made progress” towards its price stability and employment goals, a slightly hawkish outcome as this language suggests an accelerated timeline on the tapering of asset purchases. On the week, yield spreads on Ginnie and conventional ARMs were unchanged. Fixed-rate mortgage backs were mixed […]Continue Reading
Agency Market Update
The FOMC concluded its July meeting last week and, as expected, there were no changes made to monetary policy. For months now investors have looked for details regarding the Fed’s eventual QE taper, and on Wednesday Chair Powell confirmed that the committee held in depth talks regarding timing, pace, and composition of tapering at their […]Continue Reading
Fixed Rate Mortgage Market Update
Current Yield Spreads The FOMC kept policy unchanged last week, leaving its overnight target rate at 0.00-0.25% with plans of continuing asset purchases of $120 billion per month. The official FOMC statement acknowledged the economy has made progress towards the goals needed to alter asset purchases, but it didn’t provide any new information about a […]Continue Reading
Municipal Market Update
In this week’s Municipal Market Update, we highlight the following: Municipal prices were mixed daily through Thursday, and were steady 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 forecasted to be $8.59B […]Continue Reading
SBA Market Update
Fixed-Rate SBA DCPCs (SBAP) – August Auction this Week Investor interest in the August fixed-rate SBA DCPC auction this week is expected to remain strong as SBA DCPCs and SBICs offer superior convexity profiles to most residential MBS alternatives. The DCPC auction has priced at historically tight spreads this year; however, spreads widened 13 bps […]Continue Reading
CMO Market Update
July Trade Summary In last week’s update, I expressed an expectation that the July trade summary would reveal a somewhat conservative approach from portfolio managers as it relates to extending out on the curve with new CMO purchases. That forecast was incorrect. The summary statistics show that investors did extend, albeit slightly, month over month […]Continue Reading