May 20, 2019
Housekeeping Note: Due to the Memorial Day holiday, we will not publish “Sector Updates” next week. We will resume normal publication on June 3rd.
Treasury yields finished last week down by 6-9bps on maturities greater than 2 years. This marks the 2nd consecutive week of declines and, like last week, can largely be attributed to trade negotiations (or lack thereof) with China. Intraweek, yields touched even lower levels not seen since the end of 2017. They bounced back later in the week, partly, as reports surfaced indicating the U.S. was planning to remove tariffs on certain metal imports from Canada and Mexico. As long as trade tensions remain high, it is reasonable to expect continued pressure on Treasury yields. So far, yields are virtually even this morning from their close on Friday.
- Agency Bullets were 1bp wider on the week.
- Agency Callables were 3-7bps wider.
- Corporates were mixed with the 5yr widening 2bps and the 2yr and 10yr tightening 1-2bps.
- Munis widened 6-9bps.
- CMOs 2-3bps wider.
- MBS were virtually unchanged, with the 15yr 1bp wider and the 30yr flat.
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 (May) | Monthly, 5th business day
SBA Prepay Commentary (May) | Monthly, 10th business day
“Growth in payouts to savers has already begun to stall in some deposit categories. The national average rate for a one-year certificate of deposit, for example, has risen just 0.09 percentage point, to 1.01%, this year through May, according to Bankrate.com. In 2018, that same rate more than doubled.”
“As markets have swung, some investors have turned to the relative safety of government bonds. They have sent the yields on 10-year U.S. Treasurys, which fall as bond prices rise, near their lowest levels of the year.”
Adjustable Rate Mortgage Market Update
For the second consecutive week, demand for new-issue hybrid ARMs slowed, which resulted in yield spreads to Treasurys widening 1 to 4 bps. ARMs lagged their fixed-rate MBS counterparts, with yield spreads widening 1 bp on the 15-year fixed and unchanged on the 30-year fixed.Continue Reading
Agency Market Update
Both agency bullets and callables resumed their recent widening trend. Yields on 3-year bullets ended the week down 9 basis points at 2.21%, and 5-year bullets finished the week 8 basis points lower at 2.26%.Continue Reading
Fixed Rate Mortgage Market Update
Yield spreads on current production MBS to Treasurys were relatively stable last week, with 15-year widening 1 bp to 51 bps, while 30-year held firm at 76 bps.Continue Reading
Municipal Market Update
Municipals prices started the week stronger, were steady on Tuesday, stronger again on Wednesday, and were mixed on Thursday and Friday. New issue offerings are forecasted to be $5.3B for the trading week.Continue Reading
SBA Market Update
SBA prepayment speeds for SBA 7(a) pools were mixed in May compared to the prior month. The overall trend since peaking last November has been a slowdown in CPRs for both Equipment and Real-Estate pools. SBA floating-rate pools traded to financial institutions last week, but limited availability of supply has resulted in light secondary inventory levels, which has impacted activity recently.Continue Reading
CMO Market Update
Over the last two weeks, yields for 2-10 year Treasurys have dropped 13-15 bps, but yields for Agency CMOs have held up in the midst of this rally. Spreads for shorter, 2yr paper were unchanged, but 3-, 5-, and 10-year bonds saw another 2-3 basis points widening for the second consecutive week.Continue Reading