Sector Update

July 26, 2021

Last week saw yields move lower for the fourth week in a row with a bout of volatility to start the week. Yields were off 10+ bps last Monday morning and continued even lower on Tuesday before staging a rebound. The belly of the curve closed 6 bps lower while 10-year and longer maturities ended the week down only 1 bp. Markets are still struggling to digest the Fed sticking to their message of inflation being transitory, the potential for slower growth as the Delta variant continues to spread, and even the notion that perhaps, we’ve already hit peak growth.

Among many notables last week, we saw the 2s-10s go below 100 bps, reaching as low as 93-94 bps on Tuesday. It ended the week closing 1 bp higher. Also, according to the Freddie Mac PMMS survey, 15-year mortgage rates hit a new all-time low last week of 2.12.

As markets continue to digest the potential for slower growth (or not) along with whether or not the Fed will begin to taper sooner than anticipated, it makes sense that intermediate maturities haven’t been spared the latest declines as the Fed arguably faces less pressure to move short-term rates than they did. Markets are relatively calm this morning as participants seem more in a wait-and-see mode with the Fed meeting this week.

Today – Yields and curve slope virtually unchanged, equities higher

Yields end week lower – led by short/intermediate maturities as belly of curve flattens

Yield Curve Shape – 2s-5s at 66% of YTD high, 2s-10s at 68% of YTD high

Food for Thought – As 15-year mortgage rates hit new lows, a look back at prepay protection collateral

Sector Commentary (click on links for more in-depth look)

What We’re Reading

Market Today | Daily

Weekly Recap | Weekly, Friday

Brokered Deposit Rate Indications | Weekly, Monday

Investment Alternatives Matrix | Weekly, Tuesday

MBS Prepay Commentary (July) | Monthly, 5th business day

SBA Prepay Commentary (July) | Monthly, 10th business day

Bloomberg: Fed MBS Buying High on Agenda as Officials Begin Taper Talk

“Pressure on Chair Jerome Powell to begin scaling back bond buying sooner rather than later has probably eased amid concern that spread of the coronavirus delta variant could sap the economic recovery.”

WSJ: Fed Ramps Up Debate Over Taper Timing, Pace

“Because Fed officials have said they would provide ample notice before they start tapering, they look unlikely to initiate any taper at their next two meetings, in July or September.”

Vining Sparks: Coronavirus Chartbook

The information included herein has been obtained from sources deemed reliable, but it is not in any way guaranteed, and it, together with any opinions expressed, is subject to change at any time. Any and all details offered in this publication are preliminary and are therefore subject to change at any time. This has been prepared for general information purposes only and does not consider the specific investment objectives, financial situation and particular needs of any individual or institution. This information is, by its very nature, incomplete and specifically lacks information critical to making final investment decisions. Investors should seek financial advice as to the appropriateness of investing in any securities or investment strategies mentioned or recommended. The accuracy of the financial projections is dependent on the occurrence of future events which cannot be assured; therefore, the actual results achieved during the projection period may vary from the projections. The firm may have positions, long or short, in any or all securities mentioned. Member FINRA/SIPC.
Copyright © 2023
This is a publication of Vining-Sparks IBG, LLC
775 Ridge Lake Blvd., Memphis, TN 38120