February 25, 2019
Treasury yields, almost basis point for basis point, gave back the prior week’s increases as stocks stretched their winning streak to nine weeks. Heading into Friday, yields were actually higher across the curve until markets caught wind of Fedspeak, echoing their minutes, of support for ending balance sheet normalization and concerns of inflation consistently falling below their 2% target. Yesterday evening, President Trump announced a delay to tariff increases on China scheduled to begin March 1st. This morning, yields are +/- 1bp from where they ended Friday. Economic data releases this week are strong from start to finish, you can follow them daily in the Market Today.
- Spreads, for the second week in a row, moved tighter.
- Agency Bullets spreads came in 1bp.
- Agency Callables, especially those with longer call protection, tightened on the week. Unless rate volatility picks up, spreads may continue to deteriorate.
- Corporates tightened by 1-3bps across the curve.
- BQ Municipals, 10 years and in, tightened 10-12bps on the week. Longer maturities were 1bp tighter.
- CMOs were an outlier again this week and held their ground as spreads were unchanged
- MBS were mixed with 15yr ending the week flat and 30yr 3bp tighter.
What We’re Reading
Vining Sparks: Market Today
Vining Sparks: Weekly Recap
Adjustable Rate Mortgage Market Update
Yield spreads between hybrid ARMs and Treasuries held firm last week, as the broader bond market moved up in price, sending yields slightly lower across the curve. Hybrid ARM spreads have tightened in the month of February, lagging the performance of fixed-rate MBS, which have tightened at a slightly more aggressive rate.Continue Reading
Agency Market Update
The most noteworthy event of last week was the Fed’s release of their January meeting minutes, and all signs pointed to very dovish sentiment among voters. The Treasury market mostly took the release in stride but yields did end the week slightly lower.Continue Reading
Fixed Rate Mortgage Market Update
Yield spreads on current production MBS to Treasuries were mixed last week with 15-year ending the week unchanged at 48 bps, while 30-year tightened 3 bps to 75 bps. The lack of volatility along with consistent investor demand has driven spreads tighter this month by 3 to 5 bps.Continue Reading
Municipal Market Update
Issuance this week is forecasted to be $5.7B, which is well above last week’s revised level of $2.0B in issuance. The heavier new issue calendar coupled with bid lists should provide market participants with opportunities to fill their needs, as municipals remain in demand.Continue Reading
SBA Market Update
The temporary disruption in SBA new issuance due to the recent government shutdown has resulted in low secondary inventory levels, while investor demand in the SBA sector remained high last week in floating-rate and fixed-rate SBA pools.Continue Reading
CMO Market Update
Spreads for Sequentials and PACs were unchanged last week after the Treasury curve saw little movement.Continue Reading