Sector Update

October 5, 2020



Treasury yields increased in a steepening fashion last week with longer maturities increasing by 4-9 bps and shorter maturities relatively unchanged. The 2-10 spread closed last week 4 bps higher at 57 bps. The greater likelihood of additional stimulus measures along with polls suggesting a less rocky election than expected seem to be pushing Treasury yields higher. The 2-10 is currently at 61 bps which is the highest level since June 9th.



This Morning

Stocks, gauged by S&P 500 Index, broke a four-week losing streak last week and ended up 1.5%. Even with the recent weak showings, the S&P 500 ended the 3rd Quarter up 8.5% and had the best two-quarter stretch dating back to 2009. So far this morning, equities are showing strength and are up 1.3 – 1.6%. Last week’s steeper increase in Treasury yields has carried over and the curve continues to steepen. The 2-10s is 4 bps higher from the Friday close, currently 61 bps.



Food for Thought – MBS Prepay Speeds Released Tomorrow Evening

Prepay speeds for Agency MBS will be released tomorrow evening and we’ll have commentary available Wednesday afternoon. As a precursor to the release, I wanted to share two tables included in the commentary to give a sense of where we are (and were) headed into the release.

First, mortgage rates continue to hover right around lows for the year which are also all-time record lows in the history of the Freddie Mac Primary Mortgage Market Survey (PMMS).



Second, here is a table looking back and forward at market measures that affect a specific month’s prepayments. Obviously, as mortgage rates fell this year prepayments picked up. At a high level, prepayments have remained elevated for the past 5-6 months. Looking forward, it appears this will be the case for the remainder of the year save some potential seasonality effects. Given tight inventory, lack of new construction, and pent-up demand from this Spring, this Winter could be stronger than usual though.



Sector Commentary



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 (September) | Monthly, 5th business day

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


WSJ: America’s Main Street Revival Goes Into Reverse, Cutting a Small-Town Lifeline

“ESB Financial, a 119-year-old community bank, originated roughly $18 million in federal Paycheck Protection Program loans over the summer. ‘The stress is going to come nine to 24 months down the road,’ said Michael Black, an executive vice president with the bank.”


Vining Sparks: Coronavirus Chartbooks

PDF/Mobile: Coronavirus Chartbook (PDF)


Regulatory Links

Fannie Mae: 9/30 Fannie Mae Extends Timeframe for Single-Family MBS Delinquent Loan Buyout Policy

Ginnie Mae: 9/24 Notification regarding Loans after Deferment Loss Mitigation

FHFA: 9/24 Extends Buying Loans in Forbearance & COVID-Related Loan Processing Flexibilities

Ginnie Mae: 9/21 Ginnie Mae Announces Pooling Restrictions for LIBOR-based Adjustable-rate Mortgages

FDIC: 9/18 Results of Summary of Deposits Annual Survey

Federal Reserve: 9/16 Federal Reserve issues FOMC statement


LIBOR Transition Links

ARRC 9/30: August – September ARRC Newsletter

ARRC 8/27: Recommended Hardwired Fallback Language for Bilateral Business Loans

ARRC 8/18: Transition Resource Guide for ARM and Private Student Loans

ARRC 8/7: ARRC Releases the SOFR Starter Kit

ARRC: Link to all ARRC Announcements

ARRC: Link to all ARRC Publications

ARRC: Link to ARRC Fallback Contract Language

Fannie Mae: LIBOR Transition Webpage

Freddie Mac: LIBOR Transition Webpage


INTENDED FOR INSTITUTIONAL INVESTORS ONLY.
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
Member FINRA/SIPC
This is a publication of Vining-Sparks IBG, L.P.
775 Ridge Lake Blvd., Memphis, TN 38120