February 4, 2019
Last week we saw yields decline, again, by varying degrees across the yield curve. The decline in yields really took off Wednesday in the wake of the Fed’s release of their January Statement. In a nutshell, they “will be patient” when considering “what future adjustments…may be appropriate”. It isn’t that they necessarily see the U.S. economy weakening, but do want to acknowledge “…global economic and financial developments and muted inflation” lest they come across as tone-deaf. To keep things interesting though, Friday’s jobs report and ISM release propelled rates higher throughout the day and continues into this morning.
What We’re Reading/Watching
CBS Sports: Super Bowl 2019 Commercials
Vining Sparks: Market Today
Vining Sparks: Weekly Recap
- On a spread basis, the overall theme last week was towards tighter spreads.
- Corporate and Agency spreads continued their recent tightening trend.
- Munis, for the second week in a row, widened out by 1-3bps save the 15yr which was 1bp tighter.
- PAC CMOs were unchanged on the week while 5 and 10yr Vanilla spreads were 2-3bps tighter.
- MBS were mixed with 15yr MBS ending the week 1bp wider and 30yr MBS 2bps tighter.
Adjustable Rate Mortgage Market Update
Yield spreads for hybrid ARMs to Treasuries were stable for the week, despite a bond market rally that led to Treasury yields falling across the curve. ARMs underperformed their 30-year fixed-rate MBS counterpart, with yield spreads tightening on this product approximately 2 basis points for the week.Continue Reading
Agency Market Update
Agency bullet spreads tightened in by approximately 1 basis point for 2- and 3-year maturities. Bullets in the 5-year part of the curve are still trading approximately 14 basis points over Treasuries, the tightest spreads since the end of November, but still at wider margins than the market has seen for most of the last two years.Continue Reading
Fixed Rate Mortgage Market Update
Yield spreads on current production MBS to Treasuries were mixed but relatively stable for the week. The tightening of 4 to 7 ticks since year-end can be attributed to a decline in implied volatility, seasonal lows in supply, and positive sentiment following the dovish FOMC meeting.Continue Reading
Municipal Market Update
Issuance this week is forecasted to be $7.2B, which is above last week’s revised issuance of $3.8B. This increase in issuance coupled with bid lists should provide market participants with opportunities to fill their needs, as municipals remain in demand, especially with the current above-average redemption flows.Continue Reading
SBA Market Update
SBA loan applications, approvals and guarantees were not processed during the 35-day government shutdown. With the SBA closed for over a month, there is a backlog of companies awaiting loan funding from the SBA and it is expected to take a while to recover from the backlog and restore the flow of capital to small businesses.Continue Reading
CMO Market Update
This week we take a look at the January Trade Summary, a recap of the CMO trades we did with our Customers. On a spread basis, Week-over-week PAC spreads were unchanged and Sequentials tightened by 2-3bps in 5 and 10yr maturities respectively.Continue Reading