MBS MARKET COMMENTARY

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MBS Weekly Market Commentary Week Ending 11/13/2020

The 10-year Treasury yield rose to 0 .98% to begin last week, following the announcement of Biden’s victory. However, uncertainty continues to plague markets due to the absence of a standard concession and continued accusations of fraudulent voting. The uncertainty caused the 10-year to retreat to 0.89% by Friday. The spread between the 10-year Treasury to the 5/10-year blend has tightened 3bps to +72.

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MBS Weekly Market Commentary Week Ending 10/30/2020

The 10-year Treasury yield rose to 0.85%, 5bps higher than start of last week. The 30-year Treasury is currently yielding 1.63%. The Fannie Mae 30-year current-coupon spread to the 5/10-year blend tightened 1bp to +80. Volatility has risen to its highest levels in about six months.

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MBS Weekly Market Commentary Week Ending 10/23/2020

Intermediate and long-term Treasury yields crept up 10-12bps last week. The 30-year Treasury is currently yielding 1.61% and the 10-year is 0.84%. The sell-off in Treasuries was induced by increasing expectations for a stimulus package either passed before the election (unlikely), or by a democratic win in the election based on recent polls.

The Fannie Mae 30-year current-coupon spread to the 5/10-year blend tightened 2 basis points to +79 as the U.S. Treasury 10-year yield rose 3 basis points to 0.86%. The spread between FNMA 30-year 2 and the 10-year Treasury is the lowest its been in 15 months.

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MBS Weekly Market Commentary Week Ending 10/03/2020

The 10-year Treasury closed 2bps higher on Friday and is currently yielding 0.69%. The 30-year Treasury also increased 3bps to 1.48%. 10-year TIPS yield tightened 1bp to -0.94%.

MBA’s weekly mortgage applications index fell 4.8% in the week ended Sept. 25 after rising 6.8% in the prior week. Purchases were down 1.9% and refinances fell 6.5% after rising 3.4% and 8.8% respectively, in the previous week. The average 30-year fixed rate is 3.05% – the lowest in survey history, according to the MBA. Compared to last year, 30-year fixed rates are down 77bps. Freddie Mac’s 30-Yr FRM is currently 2.88%, down 2bps since last week. Also notable, pending home sales jumped 8.8% in August, following a 5.9% increase in July.

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MBS Weekly Market Commentary Week Ending 09/11/2020

Treasury yields remain relatively unchanged despite minor fluctuations in both directions over the last two weeks. The Treasury yield curve steepened slightly with the 2-10 spread widening (by 4bps) to 0.54. The 10-year yield is currently 0.67%, and the 30-year is...

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MBS Weekly Market Commentary Week Ending 08/28/2020

The US yield curve saw a sharp steepening after the Federal Reserve’s dovish statements from Jackson Hole. The plan, as described by Jerome Powell, Chairman of Federal Reserve, shifts the Fed’s focus away from a 2% inflationary target to concentrate on employment...

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MBS Weekly Market Commentary Week Ending 08/21/2020

Long and intermediate Treasury yields edged lower last week as 30-year Treasuries experienced a 10-basis point drop while yield on the 10-year fell by 5bps. The accompanying 2-10 Year spread flattened by 5bps due to the 2-Year yield increasing to .16% on Friday....

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MBS Weekly Market Commentary Week Ending 07/10/2020

Intermediate and long Treasury yields declined slightly last week, led by a 10 basis point drop in the 30-year bond yield.  The 10-year yield declined by about 3 basis points, while the 2-10 year spread also flattened by 3 bps, as yields on maturities as long as five years remain pinned in place.  In fact, the short end of the Treasury market has begun to reflect the possibility that the Fed will adopt so-called yield curve control this fall, a variation on quantitative easing where the Fed buys enough securities to cap the yield on a target maturity (generally assumed to be a short-term rate) at a certain level.  What’s interesting is that the 5-year note has begun to trade as if its yield is (or will soon be) pegged, as highlighted by the accompanying chart.  The graph indicates that the 40-day standard deviation of the 5-year yield is approaching its lowest level in years, only a few months after the pandemic-related market disruptions took the note’s volatility to levels last seen during the financial crisis of 2008-10.

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MBS Weekly Market Commentary Week Ending 06/26/2020

Treasury yields declined modestly last week, led by intermediate and long maturities.  The yield on the 10-year note dropped by a little more than 5 basis points, closing at 0.64%, while the 30-year bond yield closed 9 basis points lower to yield 1.37%.  The yield curve also flattened a bit, with the 2-10 year spread narrowing by 3 basis points to 47.5 basis points.  The 10-year TIPS yield (a proxy for the long-term inflation-adjusted or “real” yield) also declined to -0.69%, its lowest level since April 2013.  A notable market development is the bottoming out of realized Treasury volatility, especially for the 5-year note.  The chart below shows the 40-day standard deviations for the 5- and 10-year notes; while the 10-year has returned to mid-February levels, the 5-year note’s StDev recently approached its lowest print since mid-2018. 

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