Sector Update

November 20, 2017

The Treasury curve pivoted at a five-year axis last week, with a 12bp flattening of the two-year/ten-year spread equally split between a 6bp escalation at the two-year maturity and 6bp decline at the ten year. Yields for these two curve points sit in closer proximity now than at any time in the last ten years and, if the Fed elevates their short-term rate target again in December as is widely expected, further flattening appears very likely.

The municipal market and the investment grade corporate market both underperformed US Treasuries by small margins last week, with most terms and structures at the long end of the curve finishing at spreads over 3bp wider, while shorter maturities generally widened by a basis point or two. While the mortgage sector held steady versus Treasuries on a Z-spread basis, curve shape biased the more traditional curve point spreads with some products, especially 15yr MBS, which finished tighter based on an I spread basis.

Activity picked up markedly last week for most sectors. In addition to strong new issue activity and recycling of portfolio paydowns, portfolio restructuring via bond switching increased and the volume of inquiries and pace of two-way flow was quite strong at times.

Friday’s five-year Treasury closing yield of 2.06% exceeded the daily closing average year-to-date by 17bp and exceeded by 18bp the average for the last year of trading. The ten-year Treasury finished Friday at 2.34%, 6bp above the year-to-date average and 1bp below the average for the last year.




Adjustable Rate Mortgage Market Update

Yield spreads for new-issue hybrid ARMs to Treasuries remained stable for the week.  With the bulk of the origination process almost completed for the month, November issuance should come in slightly lower than October ($2.1bn). 

Continue Reading

Agency Market Update

Last week, long-dated Treasury yields fell while short-dated yields rose as investors added to bets that the FOMC will raise rates in December.  The House passed their tax reform measure, which marks a significant achievement in the GOP’s effort to overhaul the current tax system. 

Continue Reading

Fixed Rate Mortgage Market Update

Mortgage rates were generally unchanged last week and mortgage yield spreads were unchanged to slightly tighter versus Treasuries. Mortgage rates have traded in a tight range over the last month and for much of this year, while mortgage yield spreads remain historically tight.

Continue Reading

Municipal Market Update

Municipal bond funds reported investors put cash into funds for a second week, as weekly reporting funds experienced inflows of $417.719MM in the latest reporting week, after experiencing inflows of $463.044MM the week prior. The four-week moving average was positive at $121.942MM, after being in the green at $151.552MM the week prior.

Continue Reading

SBA Market Update

Investors continued to add fixed-rate SBAs, albeit at a slower pace, to their investment portfolios last week.  Activity in the floating-rate SBA sector continues to be limited, although some portfolio managers added new issue “par” pools.  In October, the SBA announced a change to the Secondary Market Program relative to the timing of the pass through of amortization excess.

Continue Reading
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 © 2021
This is a publication of Vining-Sparks IBG, L.P.
775 Ridge Lake Blvd., Memphis, TN 38120