February 19, 2019
Treasury yields managed to squeak out increases on the week with the majority occurring in 2-5 year maturities. Last week we noted it had been “the third consecutive week we’ve seen Treasury yields fall” and that it may turn into a fourth week of declines “unless markets see progress on trade talks with China, a path to avoiding another government shutdown, and/or better global economic news.” As it turned out, two out of three materialized.
- Throughout the week, President Trump made positive comments about trade negotiations with China including reportedly considering an extension of the tariffs deadline of March 1st.
- A spending bill was passed by both houses of Congress and signed by the President.
On Thursday, markets were spooked though by the biggest decline in retail sales since 2009. There has been speculation about the Retail Sales decline reported and to keep things interesting, this morning, Walmart shares surged as “holiday sales crush estimates”.
- On a spread basis, the overall theme last week was towards slightly tighter spreads.
- Agency Bullets spreads came in 1bp.
- Agency Callables tightened on the week. While still wide on a year-over-year basis, unless rate volatility picks up, spreads may not reverse trend.
- Corporates gave back last week’s widening and traded tighter by 2bps.
- Municipals tightened on the week with shorter maturities tightening the most and longer maturities relatively unchanged.
- CMOs were an outlier last week and widened for the second week in a row by 2-6 bps.
- MBS were mixed with 15yr MBS ending the week 1bp tighter and 30yr MBS 1bp wider.
What We’re Reading
Vining Sparks: Market Today
Vining Sparks: Weekly Recap
Adjustable Rate Mortgage Market Update
Yield spreads on hybrid ARMs to Treasuries tightened 2 to 4 basis points last week, which was the result of a modest bond market sell-off that generally sent yields higher across the curve. Spreads have tightened recently but remain wider compared to levels at the start of December.Continue Reading
Agency Market Update
The Treasuries market had a roughly 10 basis point swing last week across the curve, with yields ending Friday roughly in the middle of the trading range and somewhat higher than the previous week. The 2- to 5-year part of the curve is still inverted and the 2- to 10-year spread flattened to approximately 15 basis points.Continue Reading
Fixed Rate Mortgage Market Update
Yield spreads on current production MBS to Treasuries were mixed with 15yr MBS ending the week 1bp tighter and 30yr MBS 1bp wider, as Treasury prices declined modestly.Continue Reading
Municipal Market Update
Last week the yields on the two-, 10- and 30-year maturities on the MMA Triple-A Scale were steady from Thursday to Friday and they ended the week at 1.67%, 2.40% and 3.10%, respectively. Overall, week-over-week the yield on the two-year GO bond was unchanged, while the yield on the 10-year GO bond rose two bps and the yield on the 30-year GO bonds rose three bps.Continue Reading
SBA Market Update
SBA prepayment speeds in February for both Equipment and Real-Estate SBA 7(a) pools declined after increasing the prior month. Equipment pools printed a CPR of 13.62, a decline from 15.09 CPR the previous month.Continue Reading
CMO Market Update
Spreads to Treasury yields for Agency PACs and Sequentials have widened 4-8bps over the last two weeks. They had been mostly unchanged to start the year. When compared to all product types we monitor, CMOs were the only sector in which spreads widened last week.Continue Reading