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 1.42%. The 10-year TIPS yield is -0.98%, up 3bps due to CPI data showing an increase in consumer prices by 0.4%, versus the 0.3% forecasted.

Mortgage rates hit another all-time low in Freddie Mac’s Primary Mortgage Survey. Rates on 30-year fixed rate mortgages are down to 2.86%, 7bps down week over week, and 70bps lower than last year. New application activity continues to be driven by refinances, which jumped by 3%. A modest 0.2% increase was seen in purchases. Additionally, total applications are up 1.9% for the week ending 9/4, according to MBA’s Weekly Mortgage Applications Survey.

As interest rates continue to move toward record lows, the liquidity of low coupons in MBS trades remains a chief concern. On Friday, the Ginnie 2 coupon comprised a record 21% ($13 billion) of all Ginnie TBA trades. For reference, Fannie 2 coupon trades comprised 58% of all Fannie TBA trades, according to TRACE data provided by FINRA. The chart below, provided by Bloomberg, shows the Ginnie 2 coupon rally over the last few weeks.

By and large, 30-year UMBS moved in line with hedge ratios last week. The Fannie 3 and 3.5 coupon however, lagged the 10-year benchmark’s performance by 9 and 4 ticks, respectively. Lower Ginnie coupons outperformed the benchmark by 7- 8 ticks, while higher coupons Ginnies faired the same as Fannie 3 and 3.5 coupons. The 2 coupon had the strongest performance for Fannie 15-years, outperforming the 5-year benchmark by 2 ticks, while other 15-year coupons lagged the benchmark by 2-6 ticks. All in all, a better week for lower coupons, worse for higher.

In the week ahead, key reports will include July’s JOLT job openings, new inflation statistics, weekly jobless claim figures, and a highly anticipated Fed meeting on Wednesday. From the Fed meeting, investors will be looking to gain a more detailed commitment to keeping interest rates at the zero bound, as well as guidance on the stimulus policy going forward. The framework revisions provided by the Fed last month allow increased stimulus by allowing for periods of higher inflationary targets. However, if the Fed decides to use the increased capacity for stimulus to mitigate the risks of a slower recovery, the economic effects could be even less desirable in the long-term.

10-Year Treasury Yield Curve

Compare this chart with the mortgage rates chart to see how the 10-year treasury and mortgage rates are correlated. Read more below to learn how mortgage rates are tied to the 10 year treasury yield. View raw data on U.S. Department of the Treasury website.


Mortgage Rates Today

The current MBS daily rates are shown below in this chart for 5/1 Yr ARM, Jumbo 30 Yr, FHA 30 Yr, 15 Yr Fixed, 30 Yr Fixed. Sign up for our MBS Market Commentary to receive daily mortgage news in your inbox.

About the Author

Robbie Chrisman, Head of Content, MCT

Robbie started his mortgage industry career with internships during high school and college at Peoples National Bank in Colorado, and RPM & Bay Equity in the San Francisco Bay Area. After graduating from The University of Texas at Austin with a degree in Finance in 2014, he went to work at SoFi, where he rose to Director, Capital Markets assisting in the creation of SoFi’s residential mortgage division before leaving to work for TMS in Austin, Texas. From there, he went to work for FinTech startup Riivos in San Francisco and now is the Head of Content at Mortgage Capital Trading (MCT) in San Diego.

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MBS Weekly Market Commentary Week Ending 1/27/23

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MBS Weekly Market Commentary Week Ending 1/20/23

Have you heard? Inflation was so 2022. All jokes aside, after we learned last week that U.S. inflation cooled for the sixth consecutive month (the consumer price index dropped 0.1% in December compared to the month prior), expectations are now that the Federal Reserve is likely to downshift rate hikes to 25 BPS going forward, beginning at next month’s FOMC meeting.

MBS Weekly Market Commentary Week Ending 1/13/23

Pay attention to the bond market rather than the Fed. That’s what I’m hearing as we learned this week that inflation continued to ease in December, though much focus was also on Wells’ exit from the correspondent space and its ramifications. The headline CPI (-0.1% month-over-month, +6.5% year-over-year) posted the slowest inflation rate in more than a year and core inflation (+5.7% year-over-year), which excludes food and energy, also posted the smallest advance in a year.

MBS Weekly Market Commentary Week Ending 1/6/23

While it’s back to business as usual, it was a fairly quiet week as we settled into the new year. Fast inflation and high interest rates dominated the narrative and upended markets across the world last year. When the dust settled, 10-year Treasuries were 200+ BPS higher than the start of the year, the curve inverted in a bearish fashion faster and farther than ever, implied volume spiked, and mortgage spreads were pushed from stubbornly rich to suddenly cheap. The result was an entire trade-able universe moving out of the money, originations grinding to a halt, and duration becoming a function of illiquid trade flows.

MBS Weekly Market Commentary Week Ending 12/23/22

MCT would like to wish everyone a Merry Christmas and Happy Holidays. Talk to close the year has been dominated by the Federal Reserve’s most aggressive policy tightening in four decades and its impact on the economy, and for us the residential housing market.