MBS Weekly Market Commentary Week Ending 09/18/2020

Treasury yields saw subtle gains through last week. The 30-year yield increase from 1.42% to 1.45%, and the 10-year edged up to 0.70%. The 10-year TIPS yield remains at -0.97%.

Mortgage rates are also low and relatively unchanged. MBA data shows an average 30-year fixed rate of 3.07%. The MBA’s mortgage applications index fell by 2.5% in the week ending September 11th, after rising 2.9% in prior week. Purchases are down .5% after rising 3.7%, and refis are down 3.7% after rising 3% last week.

MBS had tough week relative to Treasury benchmarks. The Fannie 30-year 2, 2.5, and 3 coupon underperformed the 10-year Treasury by 6-10 ticks in a 5-day cumulative relative performance measure. Higher Fannie coupons underperformed by 4-5 ticks, exhibiting a moderate down-in-coupon bias toward underperformance. Ginnies fared slightly worse as low coupons underperformed by 12-16 ticks and higher coupons lagged by 6-9 ticks. Fannie 15-years weakened as well with coupons ending the week 11-13 ticks behind the 5-year Treasury benchmark.

On Wednesday, the FOMC announced their plan to continue holding interest rates near zero until the labor market reaches maximum employment and inflation averages the 2% target. Further, policy makers predict the Federal Funds rate to remain unchanged until the end of 2023. Without the ability to lower interest rates any further, the Fed is limited to relying on their own purchase activity to support the housing market. The Fed plans to carry on purchases of Agency MBS in quantities at least as great as the period prior – that means at least $111 billion until October 15th.

See the chart below displaying the Fed’s current assets.


Fortunately for lenders, the Fed’s insatiable appetite for MBS has continued to keep interests rates low. In fact, rates would likely drift even lower if lenders were not already handling as much volume as they can possibly process. As volume decreases due to seasonal slowing and lenders resume pricing in the FHFA’s adverse market fee, we may begin to see rates creep lower again. However, pent-up demand from delayed purchases (due to COVID) may serve to offset volumes from traditionally slowing in the winter.

This week’s mortgage-related economic calendar includes existing home sales on Tuesday, MBA mortgage applications, FHFA price index on Wednesday, and new home sales on Thursday.

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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Previous Weekly Market Reviews by Mortgage Capital Trading (MCT)

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MBS Weekly Market Commentary Week Ending 3/31/23

The market reaction went a little “too far, too fast” in regard to the Fed policy pivot. We witnessed the coupon stack (i.e., the price spread between TBA coupons) decompress in more than a trivial manner in a short period. However, the primary mortgage market has been largely reluctant to follow the Treasury rally, and mortgage rates have ultimately not dropped by the same amount as Treasury yields.

MBS Weekly Market Commentary Week Ending 3/24/23

The FOMC raised its benchmark rate by 25 basis points to a new range of 4.75%-5.00% on Wednesday, a middle ground policy move made in the hope of tampering inflation without further harming the banking system. The raise marks the 9th consecutive rate hike since the Fed began hiking in May of last year and brings the target fed funds rate range to the highest level since September 2007. While the central bank’s monetary policy has been aimed at correcting inflation, it has also revealed hidden weaknesses (e.g., entities whose balance sheets relied on low interest rates).

MBS Weekly Market Commentary Week Ending 3/17/23

Next week will reveal the Fed’s resolve on continuing to beat the drum on their aggressive inflation fight. The word until now has been that the central bank will keep hiking interest rates until inflation is under control.

MBS Weekly Market Commentary Week Ending 3/10/23

Events this week likely will lead to a higher peak interest rate than investors had been expecting just weeks ago. Central bankers appear worried about a cycle in which workers seek higher pay to offset inflation’s bite, and in turn trigger more price increases. In fact, inflation remains high because people have jobs and earn enough income to cover stubbornly expensive housing costs. Robust hiring is good for the economy and workers, but elevated pay growth puts added pressure on the Fed to bring down earnings. 

MBS Weekly Market Commentary Week Ending 2/10/23

The week after the jobs report is generally pretty data-light, and this week was no exception. With a dearth of data, market movement hinged on “Fed speak” and consumer sentiment. We saw some volatility return to bond markets as investors built in expectations for a more hawkish Fed. As a reminder, the Fed raised its benchmark rate last week to a range of 4.5% to 4.75%. Let’s run through what we’ve learned in the wake of that decision and a robust U.S. payrolls report that took some wind out of investors’ sails that had hopes for rate cuts by summer.

MBS Weekly Market Commentary Week Ending 2/3/23

As strong as economists may have thought the job market was, it’s even stronger. In addition to headline non-farm payrolls in January (517,000) beating estimates by around 300,000, employment numbers were revised higher for the past two months. Yes, a tight labor market is anathema to any sort of quick stop to the Federal Reserve’s rate hiking cycle, but the growth rate in average hourly earnings is declining, which will be welcome news to Fed Chair Powell and his colleagues. There exists a raging debate among economists over whether we’ll need a sharp rise in unemployment to keep inflation low.