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.


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Agency Market Update

Last week was a busy one in the financial markets with several impactful economic releases, the real highlight being the jobs report on Friday.  The Street was expecting nearly 1 million payrolls added, yet the number posted was a mere 266k.  Bonds rallied sharply on the news, with the 10-year yield falling to its intraweek […]

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Fixed Rate Mortgage Market Update

Current Yield Spreads The MBS rally finally reversed course last week as spreads to Treasurys widened modestly from historically tight levels.  Spreads on 15-year MBS widened 4 bps to 44 bps, while spreads for 30-year MBS widened 2 bps to 49 bps. Trading Activity The summary below reflects purchase activity from the previous week.  The […]

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Municipal Market Update

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

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SBA Market Update

Fixed-Rate SBA DCPCs (SBAP) – May Auction Last Week The May fixed-rate SBA DCPC auction last week saw strong investor interest as SBA DCPCs and SBICs offer superior convexity profiles to most residential MBS alternatives. The May DCPC auction priced at historically tight spreads. Supply in the secondary market for SBA fixed rate product has […]

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CMO Market Update

CMO spreads to Treasury yields were unchanged last week and remain steady in 2021, widening 1-4 basis points year-to-date depending on maturity and structure. This, coupled with higher Treasury yields, has translated to more attractive yields for CMOs, and for three months in a row we have seen average projected yields of greater than 1.00% […]

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